Indonesia Macro Update - INF 03 Mar 2025
KBVS MACRO UPDATE
Monday, 3 March 2025
Feb '25 Inflation: 2nd Consecutive Monthly Deflation
As expected, Indonesia experienced deflation once again in Feb ‘25, registering at -0.48% MoM (Cons: 0.11% MoM, KBVS: -0.60% MoM, Prev: -0.76% MoM), bringing the annual rate to -0.09% YoY. This marks the first yearly headline deflation since Mar ‘00.
Despite the decline in headline inflation, domestic manufacturing costs did not ease. Nevertheless, the S&P Global Indonesia Manufacturing PMI rose to 53.6 in Feb ‘25 (Prev: 51.9), supported by growth in factory activity, new orders, and a faster rise in output amid stronger domestic demand.
With annual inflation remaining below Bank Indonesia’s target, we expect this will provide additional room for the central bank to lower the BI Rate by one or two more 25 bps cuts by the end of 2025. However, we believe that any further rate cuts would be more comfortably executed once exchange rate volatility subsides, which we expect to occur by the end of 1H25.
Regards,
KBVS Research Team