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Further GDP contraction projected as Indonesia records third-month deflation
The consumer price index (CPI) fell 0.05 percent in September from a month earlier, driven by lower airline fares and food prices.
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Sellers and buyers at the Pasar Gede traditional market in Solo, Central Java on June 17. (Antara/Mohammad Ayudha)
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ndonesia will likely see a deeper economic contraction in the third quarter as the country has recorded a decline in three consecutive months for the first time since the 1999 Asian financial crisis, signaling weak purchasing power.
The consumer price index (CPI) fell 0.05 percent in September from a month earlier, driven by lower airline fares and food prices. Deflation stood at 0.05 percent month-on-month (mom) in August after a 0.1 percent monthly deflation in July, according to Statistics Indonesia (BPS) data.
On that basis, Indonesia’s annual inflation stood at 1.42 percent in September, far below Bank Indonesia’s (BI) target of 2 percent to 4 percent this year.
“The supply side is strong enough but unfortunately, purchasing power remains weak,” BPS head Suhariyanto told reporters during a virtual presser on Thursday. “The COVID-19 pandemic delivered a blow to the demand side as social restrictions to curb the virus’ spread has reduced purchasing power.”
September’s core inflation rate, which excludes volatile food and government-controlled prices, was 1.86 percent year-on-year (yoy), below the 2.03 percent rate in August, signaling sluggish demand for goods. Administered prices were up 0.63 percent yoy, while volatile prices recorded an annual inflation of 0.55 percent.
The pandemic has caused an economic fallout that has hit Indonesian consumers hard, with millions losing their jobs and falling into poverty amid slowing business activity.
Household spending, which accounts for more than half of Indonesia’s gross domestic product (GDP), fell 5.51 percent yoy in the second quarter, which compares to the annual growth of 5.18 percent in the same period last year, BPS data shows.
