JAKARTA: The World Bank cut its growth expectations for Indonesia in 2012 to 6.2 percent, from a previous forecast of 6.3 percent, due to weaker global growth prospects and uncertainty, the institution said in a report on Wednesday.
The quarterly report said Southeast Asia's largest economy continues to perform strongly and remains relatively well-positioned to weather future external shocks, despite turbulence in international financial markets.
"There is a risk of more adverse scenarios sparked by a freezing up of international financial markets that could lead to a severe, prolonged downturn, in major emerging economies, and Indonesia needs to be adequately prepared for such scenarios," said Shubham Chaudhuri, the World Bank's lead economist for Indonesia.
This could hit portfolio flows, commodity prices and both external and domestic demand in Indonesia, the report said.
The World Bank kept its 2011 growth forecast unchanged at 6.4 percent, after the G20 economy has posted 6.5 percent growth so far this year, driven by private consumption and export growth.
Indonesia's central bank sees domestic demand insulating the country from the euro zone crisis, though its governor said last it is preparing to face a deteriorating global situation by boosting the use of tools to manage liquidity.
Bank Indonesia has also stress-tested domestic banks against possible euro zone downgrades or worse and sees minimal exposure, a deputy governor told Reuters.
Investors have sold off Indonesian stocks and bonds in recent weeks, though many are still bullish on a country expected to be upgraded to an investment grade status alongside BRIC nations such as Brazil and India.
Bank Indonesia Governor Darmin Nasution said on Tuesday the country would likely get an investment grade rating by the end of next year, pushed back from a previous expectation of early 2012, due to the euro debt crisis.
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