Indonesia January 2019 inflation rate_ a light start

𝐂𝐏𝐈 𝐫𝐚𝐭𝐞 𝐉𝐚𝐧𝐮𝐚𝐫𝐲 𝟐𝟎𝟏𝟗 𝐠𝐢𝐯𝐞𝐬 𝐚 𝐥𝐢𝐠𝐡𝐭 𝐬𝐭𝐚𝐫𝐭

Favorable CPI level at the start of the year

Indonesia consumer price index (CPI) for the month of January was released at the rate increase of 0.32% mom and 2.82% YoY which is better than consensus estimates. This is encouraging given the country did fulfill its annual target of inflation rate for two years consecutively (see Graph 1).

One of the main strength

Indonesia inflation achievement in recent years has been favorable as compared to other favorite investment destinations. such as the BRIC countries (Brazil, Russia, India, and China) (See Graph 2).  Intact consumer price increase over the years facilitates government and central bank to implement other crucial economic policies, in our opinion.

Private consumption of a populated country

Private consumptions has been Indonesia economy back bone , composed of more than half of its economy (see Graph 3). As such benign inflation rates is a necessity both to keep the country stable, both economically and socially.  Aware of such importance, the government and central bank Bank Indonesia initiated an inflation monitoring special force both at the country level  (in 2005 ) and at the regional level (in 2008), which we argue plays significant role for Indonesia to have achieved current level of CPI trend. Meanwhile, based on BI survey in 2014, Indonesia household expenditure pattern goes into consumption (70%), saving (17%), and debt payment (13%) (see Graph 4).

Lead to a light private debt gearing ratio

This pattern of expenditure  which has not changed significantly over the years, ultimately form a favorable country private debt ratio (see Graph 5).  Indonesia ratio household loans including papers to its Gross Domestic Product (GDP) in 2017, by data of IMF, was at the level 17%, worse only to India, while much better as compared to Brazil, China, South Korea, United States, and Malaysia. At the other end, our checking into government data (see Graph 6) showed that the ratio of the value of credit disbursed to household to GDP was at 13% in September last year vs. 10% in the period of 2014-2017.

Indonesia Household DSR

Indonesia household DSR (see Graph 7) point an optimistic picture for decreasing rates indicates people are more willing to spend.