Indonesia is ready for a sudden withdrawal of foreign funds from the country once major central banks around the world start unwinding the aggressive monetary stimulus that has helped boost inflows into Asian assets, a senior Indonesian government official said on Friday.
Talk about when the U.S. Federal Reserve will start unwinding its hefty monetary stimulus has dominated markets this week, with comments from one Fed official that the stimulus could start to be taken back over the summer months creating some nervousness in global markets.
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"What the U.S. is doing with QE [quantitative easing] so far has helped our economy because capital inflows are robust, but of course we are already prepared for the worst case, for a sudden reversal of flows and all the money going back to the U.S., Europe or Japan," Bambang Brodjonegoro, the head of fiscal policy at Indonesia's ministry of finance told CNBC's "Cash Flow."
"So, from the fiscal and monetary point of view, we have prepared a broad stabilization framework. We have prepared for a crisis, for any crisis because we experienced the 1998 [Asia financial] crisis, the 2008 crisis," he added.
In its latest economic outlook for Asia, the International Monetary Fund warned of overheating risks in the region, saying Asian policymakers must be ready to act "early and decisively" to prevent the situation from escalating.
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Southeast Asian equity markets have seen strong gains this year and analysts say that is in part the result of strong foreign demand. Indonesia's benchmark stock index is up almost 18 percent so far this year, in line with gains in broader Southeast Asian markets.
A strong economic performance has also attracted inflows into Indonesia's bond market in recent years.
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