Indonesia risks

Time for a reality check in Indonesia

Beneath a benign surface, Indonesia's economy is suffering from worsening terms of trade and a deteriorating income account, according to Sean Darby of Jefferies.
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A weaker rupiah could spell trouble for Indonesia, according to Jefferies
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<div style="text-align: left;"> A weaker rupiah could spell trouble for Indonesia, according to Jefferies </div>

There are signs that Indonesia’s ineluctable promotion into the premier league of emerging economies could be derailed. A sudden shift of the current account into deficit, an embrace of capital inflows and a reliance on offshore dollar funding have prompted at least one analyst to warn that the country is increasingly vulnerable to systemic shocks.

“Indeed, while top-line macro data appears strong, underneath the economy has begun to experience the same destabilising financial engineering that preceded the 1998 financial crisis,” wrote Sean Darby, chief global equity strategist at Jefferies in a report on April 19.

The current account moved into deficit during the first quarter of 2012,...

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