Indonesia Economic Outlook 2009 (1): Inflation 2-4%

This is my first posting on the Indonesia Economic Outlook 2009 series. I write them in several postings since it suit to the blog reader. I will make them simple, easy to catch, and acceptable. Reader can propose topic to these series if they are not covered yet. This series will cover Inflation, BI Rate, Currency Rate, and Oil Price. Now, let’s start with the inflation.

I predict the inflation next year in a range of 2-4%, it is about +/- 3%. It is quite different with the Central Bank Rate in its Inflation Targeting of +/- 4.5%. I come to this prediction range after following the inflation path for the last 3 years. These 3 years inflation is very much complex. Indonesia was in an upturn economy in 2006, and followed by bullish in capital market in 2007. At the end of 2007, the global crisis scenario sound acceptable. Then, it came to reality in 2008. Where many developed countries tried to put their economy out of trouble. Some countries admitted that they were in recession. Bailouts were made to help various industries, especially financial, to stimulate the economy. Indonesia, recession case, admits that it is not in recession situation but has to well prepared as it mostly affected in 2009. Export will be suffered by the global crisis. Manpower in overseas will look for vacancies and most likely do it in Indonesia as imbalance supply and demand of manpower in general apply in 2009. In many countries, more and more manpower will become jobless.

For this December, I predict the inflation only 0.4% at most. It means there are rooms in range of 0-0.4% because some products already decrease their price like petroleum and travel expenses. But I may disagree with Sri Mulyani, the Finance Minister of RI, who stated that it is most likely to be deflation rather than inflation in December 2008.

Back to the inflation prediction, some issues would drive inflation as predicted because prices will decrease most likely in close range. It will be supported by the decreasing of BI Rate and Oil price.