Low Inflation, Possible Deflation Expected in August

Economists and policymakers are expecting inflation in August will have been low, or even negative, despite the Idul Adha holiday which often drives inflation.

Institute for Development of Economics and Finance Economist Bhima Yudhistira Adinegara agreed, telling Tempo the figure is likely to be very low.

"We predicted that there was a potential for deflation on August. However, we estimated that there will be a low inflation rate of 0.04 percent," he said on Saturday, September 1.

Earlier in August Bank Indonesia Governor Agus Martowardojo said Indonesia would likely record an inflation rate of around 0.02 percent, according to data from the central bank’s price monitoring survey (SPH). Martowardojo said at that rate the 2017 full-year inflation rate can be expected to hit 3.91 percent, below the target of 4 percent as set out in the revised 2017 state budget.

He added the low inflation was possibly caused by limited demand and a stable rupiah.

“Going forward, inflation is predicted to remain low around the determined inflation target,” he said, as reported by Tempo.

The predictions are a surprise, with the Idul Adha holiday typically increasing inflation each year with holidaymakers stocking up on food and other goods for the long weekend. But, this year saw a stabilization in food prices, leading to the low inflation rate.

Adinegara suggested educational expenses are to blame for typical August inflation. Although the new school year begins in July, he told Tempo, expenses continue throughout the following month too.