The Calm Before the Storm

Last week, a string of good news seemed to please our financial markets. There was October's monthly 0.08 percent deflation. This dampened last month's 6.83 percent yearly inflation down to 6.25 percent. Then there was the comforting data on economic growth. While this year's third quarter growth is indeed far from the soaring heights President Joko Widodo dreamed of, at least the 4.73 percent growth, showed a rather restrained slowdown.

On the balance of payments, Bank Indonesia estimated a third quarter surplus this year. The central bank calculated that the ratio of current account deficit to gross domestic product (GDP) will fall to 2.1 percent, less than last year's 3.1 percent. The central bank also observed that investment flows into the local financial markets were still strong. Until the third week of October, there was a net influx of Rp63 trillion buying up government bonds, of which Rp60 trillion came from long-term investors.

November 10, 2015