Indonesia Macro Update - INF 03 Feb 2025
KBVS MACRO UPDATE
Monday, 3 February 2025
Jan '25 Inflation: January Deflation Driven by Electricity Tariff Discounts
A 50% reduction in electricity tariffs, combined with declining prices of tomatoes, cucumbers, railway fares, and air transport tariffs, contributed to deflation in Jan '25, reaching -0.76% MoM or 0.76% YoY. On the same day, the S&P Global Indonesia Manufacturing PMI for Jan ‘25 climbed to 51.9 (Prev: 51.2), marking the second consecutive month of expansion in factory activity and the strongest growth rate since May ‘24.
We anticipate continued deflationary pressures in Feb ‘25, while we also expect the expansionary momentum of the Indonesia’s Manufacturing PMI in the coming months. At the same time, we believe this will help drive economic growth in 1Q25 closer to 5.0% YoY – 5.2% YoY. As a result, we also anticipate room for further BI rate cuts in 2Q25.
Regards,
KBVS Research Team