Indonesia records lowest inflation in history

Jakarta (VNA) - Indonesia's inflation rate in December 2020 was clocked at 0.45 percent and 1.68 percent all through 2020, according to the Central Statistics Agency (BPS).

The figure is the lowest full year number in history and below Bank Indonesia’s (BI) target range of 2 to 4 percent last year.

Annual core inflation, which excludes volatile food and government administered prices, fell for nine consecutive months last year up to December to 1.6 percent, a level unseen since the BPS began recording the indicator in 2004, signaling weakening demand and purchasing power.

Weak demand is feared to slow business and manufacturing activity while posing a risk to the entire economy.

Economists expect inflation to hike to near 3 percent and within the central bank’s target range in 2021 as economic activity and consumer demand recover.

However, inflation was likely to remain low in the first quarter of the year amid limited social mobility, Bank Danamon economist Wisnu Wardana said, projecting that prices would start to pick up in the second half of 2021 driven by domestic and global economic recovery as well as increased money supply from the stimulus rolled out by the government and the central bank.

According to the latest economic outlook from Oxford Economics commissioned by the Institute of Chartered Accountants in England and Wales (ICAEW), Indonesia’s economic growth is expected to rebound this year after it fell in 2020 into its first recession since the 1998 Asian financial crisis, but the coronavirus pandemic will continue to dampen economic activities.

The country’s gross domestic product (GDP) is forecast to shrink 2.2 percent in 2020 and rebound to 6.0 percent growth in 2021, driven by increases in consumer and infrastructure spending./.