Indonesian central bank sees FDI up by 42% in 2011

Indonesian central bank forecasted that foreign direct investment (FDI) this year would surge by 42 percent to 14.5 billion U.S. dollars this year, but it expected capital market inflows to fall as advanced economies recover, according to local media Saturday.

"The confidence about our economy has built up and we are glad to see this trend," Budi Mulya, a deputy governor at the central bank, told the Jakarta Globe on the sidelines of a high-level conference on Asian inflows in Nusa Dua, Bali on Friday.

But this year, the FDI growth will likely outpace capital market inflows as the U.S. economy is returning to growth, meaning the money will fly back to safe-haven assets from riskier bets in emerging markets, he said, adding that but the Indonesian government much prefers direct investment to inflows to capital markets, which are far more liquid and easier to withdraw.

The capital inflow into Indonesia have increased sharply over the past two years. They plunged to minus 1.8 billion U.S. dollars in 2008 during the global financial crisis, but skyrocketed to 26. 2 billion U.S. dollars last year as investors were drawn to high- yielding assets.

Indonesia forecasted 15.2 billion U.S. dollars in stock and bond inflows in 2010, while direct investment was 9.8 billion U.S. dollars.

Source: Xinhua

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