Mandiri Sekuritas Macroscope (01-May-2009) - Economy: Tame inflation is obvious, but export recovery may not be sustained

Inflationary pressures continued to decline in Apr09 by recording a monthly
deflation of 0.31% mom, which brought down the annual inflation to 7.31%
yoy from 7.9% yoy in Mar09. The result was lower than ours and consensus
estimate of around 7.6% yoy (-0.06% mom).

Decline in food and clothing prices, especially on jewelry prices contributed
heavily on Apr09 deflation.

Inflation is likely to continue to go south, which, we think could fall below 5%
yoy in the mid of the year as the effect of last year fuel price hike diminished.
Therefore, we revised down our YE09 inflation projection to 5.0% yoy from
previously 6.2% yoy.

Given softer inflationary pressure, we think room to lower the rate remains
widely available for BI. We expect BI to continue to cut the rate until Aug09
to reach 6.5% from currently 7.25% before it stays flat for the remainder of
the year.

Trade balance improved to US$3.3bn in Mar09, as exports (20.6% mom)
increased faster than imports (11.8% mom). Increase in commodity prices
and inventory re-accumulation after a virtual freeze in external trade
activities since mid of 2008, we think, may explain the recent improvement
in trade figure.