World Bank agrees $2 bn loan for Indonesia

The World Bank on Tuesday announced it was ready to provide Indonesia with a $2 billion loan, a backstop against any future financial shocks in one of Asia's fastest growing economies.

The World Bank said the loan, requested by the Indonesian government, would be held as a contingency against "possible future shocks and volatility."

While Indonesia has long seen growth rates that would be the envy of the United States or European nations, the economy has slowed recently due to a drop in export demand.

Jakarta and the World Bank will hope the loan sends a message to markets that Indonesia has the firepower to withstand moderate shocks, as it moves to implement economic reforms.

Though Indonesia currently enjoys better terms of borrowing than some indebted European nations, its economy remains vulnerable to external shocks.

Any deepening of the crisis in the eurozone or a slowdown in China or the United States could hit the Indonesian economy.

But exports only account for around 26 percent of gross domestic product, which makes the country less vulnerable to international shocks. However, growth still slowed to 6.3 percent year-on-year in the first quarter.

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