Inflation is creeping higher
The Indonesian economy posted encouraging results for Q1 2022. GDP grew by 5.01% year over year, above expectation. This rate of growth was almost the same as the annual rate of growth achieved in Q4 2021 of 5.02%. Compared to the previous quarter, the Indonesian economy contracted by 0.96%. However, this quarterly contraction is a regular economic pattern, in which Q4 is always the strongest quarter, while Q1 is the slowest. The fastest sector of growth was transportation and warehousing, up 15.79%, while from the expenditure side, the strongest component was exports of goods and services, which grew by 16.22%.
The improvement in the economy was accompanied by a surplus in current account for the quarter, even though the surplus was significantly lower than in the previous quarter. While in Q4 2021 Indonesia's current account reported a large surplus of $1,496 million or 0.47% of GDP, In Q1 2022 the current account registered a surplus of $221 million or just 0.07% of GDP. At the same time, the financial and capital account in the balance of payments in Q1 2022 recorded a deficit of $1,704 million, a level lower than the previous quarter, with its deficit of $2,250 million. The small surplus in the current account combined with deficit in the financial account led the overall balance of payments to a deficit of approximately $1,817 million. In turn, the foreign exchange reserves of the Central Bank also fell, to a level of $139,129 million in March 2022. Reserves declined further in April, to $135.7 billion.
The Central Board of Statistics also released the balance of trade data for April 2022. Exports increased by 3.11% month over month to reach $27,321.7 million, with non-oil exports up 3.17% to $25,888.4 million. At the same time, imports decreased significantly, by 10.01%, to $19,763.7 million, resulting in a record trade surplus of $7,558 million.
The Central Board of Statistics also released the inflation report, which showed that inflation is creeping higher. For the month of April, inflation was reported at 0.95% month over month. With that performance, year-over-year inflation stood 3.47%, a level at the higher end of the target inflation corridor of the Central Bank. The Central Bank was of the view that the economy is improving steadily. With inflation starting to rise, but with the exchange rate and foreign exchange reserves at comfortable levels, Bank Indonesia decided to keep the bench mark rate at 3.50% at its meeting in mid-May 2022, even though it decided to raise reserve requirements gradually.
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