JAKARTA, Indonesia-Indonesia's growth is slowing and its currency has plunged to its weakest point in years, but the private sector arm of the World Bank says a downcast market hasn't changed its view that Southeast Asia's largest economy remains a sound bet.

The International Finance Corporation said Thursday it increased its investments in Indonesia by almost 50% in the fiscal year to June, to $438 million, meeting a previously stated target of $400 to $600 million. It said it hopes to push its Indonesian investment next year to at least $500 million-and potentially double that-despite the country's likely retreat to growth of less than 6% this year and next.

"We think it's a good time for other investors to be continuing to look at Indonesia," said Karin Finkelston, the IFC's vice president for Asia Pacific, told reporters. She highlighted commonly cited challenges to development in Indonesia-inadequate infrastructure, a dearth of higher skills and low competitiveness rankings-but said the IFC is "confident things are moving in the right direction."

It's been a nervous few weeks in Indonesia, with local markets still collecting themselves after the summer exodus of foreign cash from emerging economies. In the past two weeks, Bank Indonesia has raised its benchmark rate 75 basis points amid the sudden appearance of double-digit inflation and a currency that plunged 6% in the month of August alone.

All of that marks what appears to be the end of a three-year phase of near record growth rates in Indonesia's trillion-dollar economy. The country had been one of the world's fastest-growing large economies in recent years, enjoying better than 6% GDP growth even during the global downturn, largely due to commodity exports and the robust domestic consumption of a rising middle class of tens of millions of people.

But waning global demand has cut into the country's ability to sell coal and other commodities, producing trade deficits-including a record deficit of more than $2 billion in July-that have rattled investors and left the country with the spike in inflation, a weakened currency and many companies saying they're waiting on major moves until the smoke clears. An upcoming election year, and all the stalled government systems that come with it, adds to the worry.

Sarvesh Suri, the IFC's country manager in Indonesia, said the country would weather the current economic conditions, in part because companies have kept debt levels low and relatively unexposed to foreign currency mismatches.

"People learned from the financial crisis," Mr. Suri said. "Most of the [recent] corporate lending was in the domestic currency."

The Washington-based IFC invests in for-profit projects to promote development, often in the form of loans. Indonesia is third largest in IFC's investment portfolio for East Asia and the Pacific, after China and Vietnam.

The IFC declined to list its individual loans in Indonesia in full. Of the $438 million invested in the year to July, it said $336 million went to manufacturing, agribusiness and services companies, with the remainder to infrastructure development and financial markets.

In the past, IFC in Indonesia has put money into clean energy projects, mobile banking, port expansion, and in support for banks to increase micro-financing, and said next year it would in invest in infrastructure, agribusiness, geothermal and access to finance, among others. Last year, it invested $300 million in eight projects here.

In manufacturing, Mr. Suri said the IFC is investing in companies that are exports-oriented, hoping to add value to Indonesia production and help balance out a spate of recent trade deficits that the current downturn in economic conditions has drawn in stark relief.

Indonesia depends heavily on foreign investment to help plug its soaring current account deficit. FDI has hit record levels in recent years, although there are signs that growth in investments is slowing as falling commodity prices push mining companies to pull back on new ventures. Mrs. Finkelston said Indonesia remains fundamentally strong, and that that for foreign investors opportunity is high.

Across East Asia and the Pacific, IFC's new investments in the 2012-2013 fiscal year were up 15% to almost $3.5 billion in more than 70 projects. Investments hit a record $6 billion across Asia, and a record $25 billion global

By BEN OTTO

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