The core inflation came lower compared to the headline inflation as the inflation in Nov-19 was built from the food baskets that were more likely related to temporary factors that may reverse themselves later.
Indonesia stock market is more likely to rise in December according to analysis of one decade of data after Indonesian equities were under severe selling pressure in Nov-19 because of worries over slowdown in the economy.
Bank Indonesia (BI) paused its BI 7-Day Reverse Repo Rate cut cycle after 4 consecutive months of rate cuts totaling 100 bps between July–October.
The JCI posted an underperformed the region because of risks arising from escalation of global trade war while domestic macro environment is not supportive of equity market due mainly to slowdown in economic growth and widening current account deficit (CAD).
Global economic downturn is inevitable because global economic events unfold in unexpected ways in 2019. There are three major events triggering world’s uncertainty: unfavorable major events in several countries, US – China trade war, and wobbling Fed Fund Rate (FFR) movement.
Indonesia export and import grew positively MoM. The surplus came from the exports that rose, while the imports grew slower due to the weakening global trade instead of stronger export substantially.
There were some adjustments on numbers of the accounts on 2Q19, such as on financial account surplus remained significant and CAD was lower than our expectation at 2.9% of GDP. The global slow down due to trade war and softening China’s expansion made us maintain our CAD target of 3.0% of GDP.
Flipped back to a trade surplus in August. Trade surplus may lead BI to become more confident to continue loosening monetary policy coupled with stronger Rupiah in the last couple of days.
Low inflation opened room for BI cutting rate for first time since 2017 to support growth.
Based on the usage, raw materials / intermediary goods became the main laggards as its import slumped.
Trade (5.26% YoY) and information and communications sectors (9.03% YoY) lifted out the growth.
Late harvest in several places as mentioned by coordinating minister of economic, mainly due to distributional problems. It made supply of shallot, chili, vegetables and some other food products were limited, hence boost the price.
Government consumption growth should also be higher at around 7.5% YoY due to election preparation. However, downside risk in investment growth.
If a trade deal to lift up previous tariff sanction is reached, it may give a boost to US and China economic.
Currency movement is also favorable as Rupiah move within 13,800 – 14,300 range.
The negative import growth of China in December has made Indonesia export to experience -4.6% YoY growth and made the trade balance remained high at USD 1.1 bn.
Bank Indonesia (BI) will start its two-day board of governor meeting in Feb 20 and announced the result in Feb 21.
Initially, we expect that airlines baggage fee will push transportation inflation higher in January.
Bank Indonesia (BI) is expected to release 4Q18 balance of payment data (BoP), including the current account deficit (CAD) data, on Feb 8.
Industry wise, the main source of growth came from services sector especially trade and communication.
President Trump has promised to raise the tariff rate on USD 200 bn in Chinese imports to 25% from 10%.
Indonesia’s investment growth was still high at 6.96% YoY in 3Q18 and BI still see the growth will be above 6% YoY in both 4Q18 and 1Q19.
Lower oil price started to take oil and gas import down as December figure denoted negative growth.
There are some concerns of government’s opportunity to raise subsidized fuel price after 2019 election.