Growing relatively well

INDONESIA - Report 28 Feb 2022 by Cyrillus Harinowo

Although less than predicted, Indonesia saw a small spike in its economic growth in the fourth quarter of 2021. The Indonesian economy in Q4 2021 reported an increase of 5.02% year over year. Compared to the previous quarter, the Indonesian economy grew by 1.06%. This rate of growth was​ actually below expectations since various indicators have shown a remarkable rebound, such as growth in the trade sector as well as in the PMI Index. However, even with that level of growth, especially in Q4, the Indonesian economy has grown relatively well.

The improvement of the economy was accompanied by a current account surplus for the quarter, albeit lower than that of the previous quarter. While in Q3 2021, Indonesia's current account registered a very large surplus of $4,970 million or 1.65% of GDP, in Q4 the Indonesian current account resulted in a much smaller surplus, of $1.415 million or 0.45% of GDP. The financial and capital account in the balance of payments in Q4 recorded a far larger deficit, leading the overall balance of payments to register a deficit of approximately $844 million. In turn, the foreign exchange reserves of the Central Bank also fell somewhat, to a level of $144,905 million in December 2021. In January, foreign exchange reserves declined further, to $141,344 million.

The Central Board of Statistics also released the trade balance data for January 2022. Exports fell significantly, by 14.29% M/M, to $19,164.1 million in January, with non-oil exports down sharply, by 14.12% to $18,262.9 million. At the same time, imports also fell significantly, by 14.62%, to $18,231.2 million, resulting in a trade surplus of $932.9 million, below the surplus of the previous month. The decrease in exports was due to seasonality; in the beginning of the year, trade activity is always less hectic than at the end of the year. Even so, compared to the same period of the previous year, exports rose by 25.31% while imports rose by 36.77%

The Central Board of Statistics also released the inflation report, which showed mild inflation for January at 0.56%. With that performance, Y/Y inflation stood at 2.18%, a level at the lower end of the target corridor of the Central Bank. The Central Bank was of the view that the economy is improving steadily. Therefore, with inflation remaining subdued and the exchange rate and foreign exchange reserves at comfortable levels, Bank Indonesia decided to keep the benchmark rate stable at 3.50%.

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