IMF asks Indonesia to check inflation

Over the past year, the global economic environment has become more challenging for Indonesia.

Last Updated: Aug 31, 2013, 13:47 PM IST

Washington: The International Monetary Fund has suggested to policymakers in Indonesia to focus on anchoring inflation expectations and controlling its current account deficit in a bid to tackle current economic challenges.

"Monetary policy should continue to focus on anchoring inflation expectations, reining in the current account deficit, and maintaining a healthy reserve buffer," Xinhua quoted David Cowen, advisor for IMF's Asia and Pacific department, as saying Friday.

"Fiscal policy will need to support monetary policy in this effort, underpinned by further tax and subsidy reforms to ensure adequate space for social and capital spending, including new health protections in 2014," Cowen said.

Over the past year, the global economic environment has become more challenging for Indonesia. A further fall in commodity prices and slowing growth in major emerging markets (EMs) trading partners have adversely affected Indonesia's export performance, he said.

"More recently, the prospect of a gradual exit from unconventional monetary policies in some advanced economies has prompted a marked shift in financing conditions for EMs, with the effects on Indonesia intensified by its external imbalances," he added.

More intense structural reform efforts are needed to reduce supply bottlenecks, broaden the export base, and bolster medium-term economic and employment growth, in order to provide more opportunities for Indonesia's youthful labour force and facilitate greater regional and global integration, he suggested.

IANS