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Indonesiafaces limited exposure to a large exit of foreign capital at a time of globalrisk aversion due to strong fundamentals and relatively low dependence onexternal demand, the IMF said on Thursday.
TheInternational Monetary Fund cited the countryâ€™s strong export growth, includingin manufacturing, and said the continued flexibility of the rupiahâ€™s exchangerate would help protect against volatile cash inflows.
Thecomments come as Indonesiaâ€™s central bank tries to cap huge inflows of foreigncash from investors seeking higher interest rates than in the West, which itfears could trigger economic instability.
â€œIndonesianGDP growth is projected to remain robust at around 6.5 percent in 2011--12,â€the IMF said in a statement following a consultation with Indonesian officialsand central bankers.
â€œIncreasesin both foreign and domestic investment are supporting growth, whileaccelerating credit growth and expected reductions in energy subsidies shouldpush core inflation modestly higher this year and into 2012,â€ it said.
The fundalso urged Indonesia to reduce fuel subsidies so that it could boost spendingon infrastructure and social welfare.
IMF,however, said there was a risk of higher inflation if the government cut energysubsidies, and that the central bank would need to â€œact decisivelyâ€ if thegovernment took that course.