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Jakarta Post

Foreign funds will not create bubble: WB

  • The Jakarta Post

Jakarta   /   Wed, October 20 2010   /  09:52 am

Indonesia remains safe from the dangers of an economic bubble despite growing concerns that the currently large inflow of foreign funds into the country could push up asset prices to an unrealistic level, a World Bank economist says.

World Bank (WB) senior economist in Jakarta Enrique Blanco Armas said Tuesday that the large amount of foreign capital inflow into Indonesia’s debt and equity market had not yet posed a threat to the country’s economy. “Whether [the capital inflow] will make a bubble in the Indonesian economy, it will be very little,” he told journalists after the launching of the WB’s latest East Asia and Pacific economic update titled “Robust Recovery, Rising Risks”. However, he said, the central bank should avoid using an interest rate instrument to curb the inflation resulting from the increase in the liquidity as the consequence of the foreign capit...