Preparing for the new normal
The Indonesian economy has been significantly affected by the pandemic for the past two years, and this has had a significant bearing on the Indonesian government budget. Expenditures for medical assistance were very high over the past two years, as were expenses for the social safety net programs necessary to lift people’s income, which had experienced much downward pressure. Therefore, it is natural that the Indonesian government has been closely monitoring the situation, day by day, to look for signs of the pandemic's abating.
Apparently signs of a significant reduction in new Covid infections have been seen over the past several weeks. At the same time, the latest pandemic wave was dominated by the Omicron variant, which had a less severe effect on its victims. Even though the number of newly infected cases jumped to a level higher than at the time of the Delta variant, the number of people hospitalized was significantly lower, so the government concluded that this could be the best time to shift gears from the pandemic situation to a "new normal" situation.
In the midst of this, the Central Board of Statistics in Indonesia released its balance of trade report for the month of February 2022. The trade balance surplus surged once again, even though it was somewhat lower than in the last months of 2021. The surplus in February came in at $3,825.6 million compared to $962.6 million in January 2022. The total trade surplus for the first two months of 2022 stood at $4,788.2 million, 34.5% higher than the $3,588.2 million achieved in the same period of the previous year.
Exports in February reached $20,464.0 million while imports reached $16,638.4 million. Cumulative exports for January-February 2022 reached $39,637.7 million while cumulative imports for the same period reached $34,849.5 million. The trade figures showed that the level of exports has expanded after having retreated in January. One of the main factors behind the trade surplus was the commodities boom, which pushed prices for crude palm oil and coal significantly higher. Exports of iron and steel products have also consistently been some of the largest exports in the country.
The Central Board of Statistics also reported the Consumer Price Index for the month of February, which resulted in mild deflation of 0.02%. With that monthly deflation, Y/Y inflation in February reached 2.06%, a level at the lower end of the target inflation corridor. While the monthly inflation rate is benign, the Y/Y figure was higher than in the previous year. Therefore, Bank Indonesia has increased its vigilance on this front. However, the Bank decided to keep the bench mark interest rate constant at 3.50% at its Monetary Policy Meeting in March 2022, at a time when the US Federal Reserve inched up its interest rate.
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