Global growth likely to be weaker than expected: IMF head

Indonesia: Global economic growth is likely to be weaker than earlier expected and will remain at moderate levels, the head of the International Monetary Fund said on Tuesday. IMF Managing Director Christine Lagarde said Asia is still expected to lead global growth, but the pace is slowing and could sag further because of recent financial market volatility. Speaking in a lecture at the University of Indonesia, Lagarde said the global economic situation will have a significant impact on developing countries, including Indonesia.

"Overall, we expect global growth to remain moderate and likely weaker than we anticipated in July," Lagarde said. "This reflects a weaker-than-expected recovery in advanced economies and a further slowdown in emerging economies, especially Latin America." She said Indonesia, like many emerging market economies, is being buffeted by another bout of global financial turbulence. She added, however, that Indonesia has ample experience in handling such turbulence. The rupiah, Indonesia's currency, has fallen beyond 14,000 per US dollar for the first time since July 1998, when Indonesia was still plagued by the effects of the Asian financial crisis, which led to the downfall of dictator Suharto in massive street protests.

The rupiah has weakened against the dollar since 2013, with the recent devaluation of China's yuan contributing more pressure. She said emerging economies including Indonesia need to be vigilant in handling the potential spillover from China's slowdown and the tightening of global financial conditions.

"Indonesia, as one of the main partners of China, should be prepared to face the emerging challenges of this transition process," she said. Indonesia's growth has been slowing for the past four years, and has recently fallen below 5 per cent for the first time since the global financial crisis.

Lagarde, who is on a two-day visit to Indonesia, met with President Joko "Jokowi" Widodo on Tuesday and discussed the global economic situation. She also had talks with several senior economic officials, including the country's central bank governor. Speculation that Indonesia is seeking loans from the IMF has been denied by both sides. "We will not be asking for money," Vice President Jusuf Kalla said Monday, while Ben Bingham, the IMF's senior resident representative for Indonesia, said the speculation was baseless.