A Sign of Slower Growth?
The Central Board of Statistics recently released the National Account Statistics for the first quarter of 2016, which reported slower-than-expected growth. General expectations were that Indonesian economic growth would be somewhat higher than the previous quarter, but the CBS reported a rate of 4.92% compared to 5.04% in the previous quarter. However, the Central Board of Statistics emphasized that this rate of growth ¬was higher than in Q1 2015, which indicated that the trend remained positive for the economy.
While below expectation, many analysts still believe the overall growth of the economy provides much hope for the coming months. Therefore the below-expectation growth did not become a hot topic after the issuance of the report.
The lower-than-expected growth was accompanied by a smaller deficit in the current account. While the fourth quarter 2015 current account deficit had widened to around $5.1 billion or 2.39% of GDP, the deficit in Q1 2016 narrowed to $4.7 billion or 2.19% of GDP. The smaller current account deficit, together with the ample surplus in the financial account, resulted in a surplus in the overall balance of payments, increasing foreign exchange reserves to $107.5 billion from $105.9 billion at the end of 2015.
The smaller deficit in the current account was due to the better trade balance, which showed surpluses for three months in a row in the beginning of 2016. After the adjustment of the import data to a free-on-board basis, the trade balance for the first quarter of 2016 registered a surplus of $2.778 billion, higher than the surplus of $1.961 billion in the previous quarter.
The CBS also reported the trade balance for April 2016, which showed another surplus, of $627.2 million, higher than the surplus of the previous month. Apparently, the rise of imports in preparation for the fasting month and the Muslim holidays, which will start in early June and peak in early July, already took place in March. Based on previous patterns, the Muslim festive seasons usually carry a big rise in imports. In the meantime, exports remained stable for April compared to the previous month. The deviation was only due to the lower number of days in April compared to March.
In the monetary sector, the Consumer Price Index registered deflation of 0.46% in April 2016, leading to year-on-year inflation of 3.60%, at the lower end of the Bank of Indonesia’s target corridor. Year-to-date inflation stood at 0.16%, relatively low for the year. Meanwhile, year-over-year core inflation stood at 3.41%. Given the benign inflation and external data, Bank Indonesia decided to keep the benchmark interest constant at 6.75%.
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