This Week’s Headlines (Jun 1-7,2024)

07 Jun 2024

Bilateral Cooperation
Energy Transition
This Week's Headlines

Indonesia president says plan to start working from new capital city in July


Indonesia's President Joko "Jokowi" Widodo said on Wednesday he plans to start working from the new capital city next month amid concerns over the future of the project following resignations of senior executives overseeing the development. 


Jokowi said progress of a number of infrastructure development under the first phase of the $32 billion capital city, called Nusantara, on Borneo island, has reached around 80%. 


"God willing, in July I will start working from the new capital city," Jokowi said in an Instagram post, adding that preparations to celebrate Indonesia's 79th Independence Day in the new capital in August are well underway. 


The head and deputy head of the body overseeing the planned new capital have unexpectedly resigned, an official said on Monday, raising concerns that it would shake investor sentiment. 


Jokowi earlier on Wednesday dismissed the concern when asked whether he is worried about it. He was in Nusantara to inspect the development progress and launch more building construction. 


Source: Reuters 



Inflation cools more than expected in May


CPI growth dropped to 2.8 percent yoy in May, a tad lower than expected by analysts from Moody’s Analytics, who had projected a rate of 2.9 percent. 


Inflation eased in May as price pressures on food and transportation moderated compared to the previous month, following the end of the seasonal Idul Fitri effect. 


Consumer price index (CPI) growth was recorded at 2.8 percent year-on-year (yoy) in May, slowing from 3 percent booked in the preceding month, according to Statistics Indonesia (BPS) data published Monday. 


The figure came in a tad lower than expected by Moody’s Analytics, which had projected an annual inflation rate of 2.9 percent. 


The reading remains well within Bank Indonesia’s target range of between 1.5 and 3.5 percent for this year. “This was the lowest inflation rate since February 2024,” Josua Pardede, chief economist at private lender Bank Permata, commented in a statement on Monday. 


Food remained the main driver of CPI growth in May, with consumer prices in the volatile food category up 8.14 percent yoy. 


That nevertheless marks a slight moderation from a 9.6 percent yoy increase logged in the same products group in the previous month. 


Rice, shallots, poultry and red chilis were among the staple foods contributing the most to inflation, despite prices of these goods experiencing a declining trend, except for red chilis. 


The second-largest contributor was the transportation sector, which saw inflation of 1.34 percent yoy this May. 


Core inflation, which excludes typically volatile food and energy prices, was recorded at 1.93 percent yoy this May, accelerating from 1.82 percent yoy in the preceding month. 


“Core inflation rose because of persistently high gold prices amid increasing global uncertainty. But it eased on a monthly basis as overall demand tended to normalize post-Lebaran,” Josua said. 


On a monthly basis, the CPI declined marginally, driven mostly by easing transportation and food prices. 


Private lender Bank Danamon economist Irman Faiz said in a statement on Monday that the easing of food prices in May was partly thanks to ample supply and reduced impacts of the El Niño climate phenomenon on food production. 


Moreover, several regions in Indonesia entered the harvest season in April, which was expected to further alleviate price pressure from food. 


Irman pointed out that May’s inflation appeared to be “hotter” than the historical pattern for the post-Lebaran period, indicating that domestic inflation risks were skewed toward the upside. 


“Additionally, the continuous rise in input costs also poses a risk to inflation in the coming months,” Irman said. 


He added that the lender expected inflation to remain under control with the final figure at the end of this year at around 2.9 percent yoy, following a potential weakening in demand. 


Meanwhile, Bank Indonesia is expected to hold its policy rate at 6.25 percent this month, given the need to safeguard the rupiah’s exchange rate against the greenback, while preventing an upside risk to inflation. 


Separately, Irman said in early May that BI would “have room to cut after the Fed begins its rate cut cycle, which we expect to happen in December 2024”. 


Source: The Jakarta Post 



Indonesia, South Korea sign cooperation in carbon emission reduction


Indonesian Coordinating Minister for Economic Affairs, Airlangga Hartarto, and South Korean Trade Minister Inkyo Cheong signed a memorandum of understanding (MoU) on the implementation of Article 6 of the Paris Agreement, in particular, to cut carbon emissions. 


The agreement was reached on the sidelines of the Indo-Pacific Economic Framework for Prosperity (IPEF) Ministerial-Level Meeting in Singapore on Thursday. 


"To reduce carbon emissions by 31.89 percent with our own efforts and up to 43.20 percent with international support, Indonesia is seeking to explore cooperation, both bilateral and multilateral," Hartarto said in a statement from his ministry. 


He welcomed the initiative of the South Korean Ministry of Trade, Industry, and Energy (MOTIE) to build bilateral cooperation with Indonesia to implement Article 6 of the Paris Agreement. 


Under the collaboration, South Korean and Indonesian companies will be encouraged to work together to develop projects to reduce carbon emissions in Indonesia, supported by funding subsidies from MOTIE. 


In addition, the two countries will obtain carbon credits through Internationally Transferred Mitigation Outcomes (ITMO) from select projects that receive subsidies from MOTIE. 


"MOTIE has contacted the Coordinating Ministry for Economic Affairs since last year. We agreed about the cooperation and signed the MoU today," Hartarto said. 


The form of cooperation in the MoU shares many similarities with the Joint Crediting Mechanism (JCM), which has been carried out by Indonesia and Japan since 2013, he said. 


Currently, there are 55 JCM projects spread across various regions of Indonesia, which have contributed significantly to supporting low-carbon development in the country. 


Hartarto also expressed hope that the cooperation with South Korea would significantly contribute to Indonesia's efforts to achieve the targets of enhanced nationally determined contribution (ENDC) by 2030 and net zero emissions (NZE) by 2060 or sooner. 


He underscored that the collaboration could support sustainable development in Indonesia by increasing green investment. 


Source: Antaranews