Weekly Economic Report

  • The significant inflows into Indonesian market both in bond and equity markets in June have pushed the JCI to hit its new record of 3,888 and the 10YR government bond to fall from 7.7% to 7.318% as fear of Greece debt crisis and the possibility of another US recession eased. For that reason, IDR swing back to Rp.8,523 against USD after hitting Rp.8,630 per USD, its lowest level in June.
  • In the 1st week of July, there is a possibility that the IDR will continue to appreciate and trade from Rp.8,500 to Rp.8.530 per USD.
  • Indonesian inflation started to hike more significant in June increased by 0.55% mom (5.54% yoy) after a 0.12% mom (5.98% yoy) increase in May as the price of rice, the main component of food has risen. Food component contributed about 56% of the June headline inflation.
  • The inflation pressure is expected heighten in the next 3 months due to seasonal reason. Despite this potentially higher inflation we believe that the actual rate may be below the government target of 5.3% in 2011 as the government promised not to lift the fuel subsidy this year. Amid the higher expected inflation, we think that BI may keep its benchmark rate this July meeting due to some reasons mainly concerning the global liquidity that may continue to affect the inflow into Indonesian market.
  • May export posted a significant increase of 10.8% mom or 57% yoy generated by both oil and gas exports and commodities base non oil exports as well due to higher commodities prices including oil, crude palm oil, coal and other minerals.
  • Meanwhile imports has declined by 0.42% mom as oil and gas imports decreased by 8% mom. The lower oil import may come from the fact that fuel consumption has already exceeded the quota for the first 4 months. Non oil imports rose by 2.34% mainly due to capital goods imports. The data also shows that imports from Japan have recovered after falling last month.
  • The trade balance records surpluses of US$3.5 billion that accounts of 80% to the additional increase of foreign exchange reserves in June of US$4.3 billion.