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    Farah Ramadhana
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    Macro Brief (Mar-22 Inflation) - OCE BMRI

    Uploaded by

    Farah Ramadhana

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
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    Macro Office of Chief Economist aor Economic indicators Real GOP (%yoV) Ination (yoy, eo¥) Inflation (yoy, avs) |F/Uso (coy) ToR/USO (ave) cA oto 181 7-day RR Rate Key Rates (%) Deposit Facility Rate Lening Fait Rate OR 10¥ Bond Viele Fed Funds Rate Ecaate Bot Rate ‘povepston22 Source: soomberg Faisal Rachman Economist 2021 368 187 14283 a2 350 2022F sa7 330 268 14308 14392 425 Dec 21 _Mar-22" 428 636 02s 0.00 as 428 67a 050) .00| 078 faisal.rachman@bankmandiricco.id +62 21 5245516 mandiri ‘As expected, monthly inflation jumped in Mar-22 ‘Mar-22 Consumer Price index (CPI) was up by 0.66% mom (ys. 0.02% mom in Feb-22). The realization figure was below our forecast of 0.71% mom and above market consensus forecast of 10.60% mom. The upsurge was mainly driven by food price increase amid seasonally higher food ‘demand in a month before Ramadan, and revocation ofthe reall price coiling (HET) for cooking Ol. Food, Beverage & Tobacco expenditure group index was up by 1.47% mom, contributing 0.38 ppt to inflation. Household fuel was also observed to rise. Housing, Water, Electricity, & Other Fuelindexincreased by 0.41% mom, contributing 0.08 ppt. The decline in the COVID-19 cases has allowed the government to ease public activity restrictions (PPKM), improving public mobility This, hence, hiked restaurant and transport inflation. Food & beverage Provision/Restaurant and ‘Transportation indices rose by 0.32% mom and 0.42% mom, cantrbuting 0.03 ppt and 0.05 ppt, respectively. Additionally, increasing uncertainty in the financial market due to the Russia Ukraine conflict has caused the gold price to go up. Personal Care & Other Services index, thus, increased 1.14% mom, contributing 0.07 ppt. Considering the first three months of the year, inflation is reported at 1.20% ytd (vs. 0.44% ytd in 3M21}. ‘Mar-22 annual inflation rate reached the highest level within the last two years. On annual basis, headline inflation strengthened to 2.64% yoy in Mat-22 (vs. 2.05% yoy in Feb-22). The realization figure was close to our forecast of 2.69% yoy and above market consensus forecast of 2.55% yoy. Core inflation also strengthened to 2.37% yoy (vs. 2.03% yoy in Feb-22), indicating ‘demand to continue improving, The realization igure was lose to our forecast of 2.34% yoy and market consensus forecast of 2.33% yoy. Volatile and administered price inflaton strengthened ‘0 3.25% yoy and 3.06% yoy (vs. 1.81% yoy and 2.34% yoy in Feb-22) ‘OUR VIEW: The inflation trend continues to increase going forward. We believe the demand side inflationary pressure (demand-pull infation) to continue rising amid accelerating economic recovery. Public moblity is expected to keep increasing due to PPKM easing, thanks to declining number in the recent COVID-19 cases, which will increase money velocity hence inflation. Pressure from the supply-side (cost-push inflation) also tends to increase as the Producer Price Index (PPI) inflation and Wholesale Price Index (WP!) infiation have been already above CPI inflation since last year. This suggests the risk of supply-side inflation pass-through to the ‘demand-side inflation. The pressure on the supply-side, moreover, will remain high for a longer term than previously anticipated amid uncertainty surrounding the Russia-Ukraine conflict which has caused commodity, energy, and food prices to further rise. This gives pressure to the {government to adjust some of non-subsidy energy and fuel prices, leading to higher administered Price inflation. The conflict also hikes the gold price since its one of safe haven assets Starting Apr-22, to support fiscal consolidation agenda, value-added tax (VAT) rate has been increased from 10% to 1196, which is estimated to contribute 0.2 ~ 0.3 ppt to inflation. The government has also increased non-subsidy fuel, namely Pertamax, by 39% to Rp12,S0O/fiter. ‘This contributes around 0.2 ppt to inflation, assuming that there is no change in subsidy fuel prices (Pertalite and Premium). Yet, we will be watchful to this matter as this could trigger buyers to shift its purchases to Pertalite. We still believe the government will leave Pertaite and Premium prices unchanged to shun a significant inflationary impact on the economic recovery as their price adjustment will have second-round impact on other good prices. The government wil keep actively observe the windfall revenue from increased commodity price and fuel subsidy burden in the 2022 State Budget in maintaining the prices. Rising commodity prices can provide 2 buffer and support the budget role as shock absorber. The government also has an option to use excess balance or reallocate/repriritize spending budget. Therefore, adjustment in subsidy fuel prices will depend on the abilty of the 2022 State Budget to absorb the price gap with economic price (without subsidy). Inthe short run, the seasonal inflation of Ramadan and Eid ab Fite holidays in Apr —May-22 is another thing to anticipate. Allin all, we are in a process of reassessing our 2022 inflation forecast of 3.30% as now we see the upside risks more likely to be higher, particulary the impact ofthe global oil price movement ‘ond ts spill over to the domestic fuel pices. Page 1 of 3 Macro Brief © Office of Chief Economist Macro Office of Chief Economist aor mandiri al CP! Inflation 2 ° me Heating rhe Core ths 8 —haiminstered ne 15 woiate- ns 7 PI (% mom) Rea eon 08 o7 06 os oa 03 02 04 00 04 02 03 January June February arch psi Ms August october September November December 2070 201 20 9 16 ye xyev 7 CnC a ag sm lation (yoy) ths —siroRRR ns Serene a0 20s 2016 20 2018 2019 2020 aoa Feb-22 Mar22

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