Mobility restrictions for the holiday

INDONESIA - Report 30 Apr 2021 by Cyrillus Harinowo

Indonesia is in the midst of the fasting month, the Ramadan. In the second week of May 2021, the holidays will start and they are usually full of celebrations, among families and in communities. Prior to the holidays, millions of people will go back to their hometowns and villages to see their parents and families. During this holiday period people will spend trillions of rupiah of the savings they accumulated over the course of the year before they return to the cities where they normally live and work.

These cycles of spending activity are always easily seen in the banking system, and for years, they drove the economy in second and third-tier cities and villages. They would drive imports to spike one to three months prior to the holidays, which in the past would cause huge trade deficits. This year, however, due to the country's strong export performance, the spike in imports did not lead to a deficit in the trade balance, which instead maintained a large surplus.

Last year, the “homecoming” traditions were banned by the government in order to arrest the spread of the coronavirus. Those restrictions seriously impacted both citizens and the economy. This year, the Indonesian government learned a bitter lesson from other countries and tried to reinstate the ban on that kind of mobility. If before the pandemic, mobility to hometowns was encouraged and in fact, was facilitated with longer holidays, this time the ban was once again imposed. It is hoped that the spread of the virus can be further contained.

In the midst of Ramadan, the Central Board of Statistics reported that the trade balance in March 2021 remained in a large surplus. Exports for March reached $18,354.6 million while imports reached $16,787.2 million, for a trade balance surplus of $1,567.4 million. Cumulative exports between January-March 2021 reached $48,904.4 million, while cumulative imports for the same period were $43,382.1 million. Thus, the cumulative surplus for Q1 2021 stood at $5,522.3 million. The trade balance showed that the level of exports has started to expand beyond pre-Covid levels.

The Central Board of Statistics also reported the Consumer Price Index for the month of March, which showed inflation of 0.08%. With that monthly rate of inflation, year-over-year inflation stood at 1.37%, a level below the Central Bank's target inflation corridor. With that level of year-over-year inflation, Bank Indonesia decided to keep the bench mark interest rate constant at 3.50% at its Monetary Policy Meeting in April . This policy, together with other measures by the Central Bank, has succeeded in keeping market sentiment on Indonesia high.

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