Stanchart: March 0.1 Percent Will Deflation

During this time, inflation in March was constantly declining.

Standard Chartered Bank estimates that Indonesia will experience deflation in March 2011 at 0.1 percent. The year on year, the inflation rate estimated at 6.9 percent, or well above the government target of 5.3 percent.
"So far, its history in March inflation was likely to go down," said Standard Chartered Bank's Indonesia economist, Erik Sugandi, in the discussion of Indonesian Economic Crisis Related to the Middle East and Japan in Jakarta, Tuesday, March 29, 2011.
According to Erik, deflation in March 2011 caused by a number of factors, mainly due to the inclusion of the harvest season in a number of national rice production centers. Harvest season will certainly cause a national food stocks come awake in addition to a decrease in prices at the consumer level.
Another factor is government policy that duty free imports for some food commodities. For information, the government has issued Regulation of the Minister of Finance (PMK) No. 011/2011 concerning 13/PMK Fifth Amendment of the PMK No. 110/PMK.010/2006 on Stipulation System Tariff Classification of Goods and imposition of duty on imported goods.
FMD is effective on January 24, 2011 to December 31, 2011 and will be evaluated two months before the term expires. With the new regulations, tariffs, import duties on goods imported for 57 food products is set at 0 percent.
Erik added, deflation in March 2011 is also likely due to the strengthening of the rupiah against foreign currencies. In addition, the policy of Bank Indonesia as the monetary control does not raise its benchmark interest rate or BI Rate.
However, Erik stated inflation until the end of 2011 is estimated at around 7 percent. This assumption is based on the level of gross domestic product (GDP) is estimated at 6.5 percent and crude oil price of U.S. $ 105 per barrel until the end of 2011.
"If there is no restriction or increase in oil prices, could create a decrease in inflation. Can be below 6.5 percent," said Senior Economist for Standard Chartered Bank Indonesia, Fauzi Ichsan.
In their analysis, Erik also predicted Indonesia will experience the highest inflation in the second quarter-2011 or rather approached in May 2011. Inflation is mainly driven by domestic factors due to the psychological impact of public expenditure that has been preparing for the new school year.
In addition, the inclusion of the fasting month and Idul Fitri will also encourage inflation.