Some fear Indonesia is heading for crisis. Growth in the second quarter dropped below 6 percent. Deficits in both the current account and trade widened markedly. The rupiah fell some 10 percent in August to its lowest level against the U.S. dollar in four years. Investor confidence has been shaken.
The estimate is that a staggering $4 billion in capital has recently flowed out of the country. If there is a crisis, the entire region should be concerned. The Association of Southeast Asian Nations (ASEAN) is building its Economic Community by 2015, and Indonesia is some 40 percent of the region's economy.
Investors see the region as an interconnected whole, and past crisis shows how quickly and indiscriminately contagion spreads. Indonesia's ASEAN neighbors should watch its economic woes carefully, as they too have ridden the same wave of growth in recent years.
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