Indonesia was warned by the World Bank and IMF to bring more profound reforms to Southeast Asia's biggest economy if it has any hope of returning to stronger growth and tempting back jaded investors. With the many government officials now squarely focused on next year's parliamentary and presidential elections, few economists are expecting any serious reform until a new government is in place by 2015. "In light of the slower pace of growth, and the risks facing the economy, there is a strong need for Indonesia to augment the recent macro focus on tighter monetary policy, exchange rate adjustment and import compression, with deeper reforms to lift export performance and support investment inflows," the World Bank said in a quarterly review of the Indonesian economy. The central bank has largely shouldered the job of bringing down a ballooning current account deficit that has sapped investor confidence in Indonesia's economy and sent the rupiah skidding more than 20 percent against the dollar this year, making it Asia's weakest currency. It has pushed up interest rates by 175 basis points since June, in part to slow the economy and curb imports. "The economy would benefit from policymakers focusing on longer-term investment...monetary policy cannot be the main policy response," the World Bank's Indonesia head, Rodrigo Chaves, said in a statement. Indonesia's dependence on commodity exports has been hit hard by the global economic downturn and now it will have to weather the impact of U.S. Federal Reserve moves to pull back on years of cheap finance, which could be decided as early as this week after a policy meeting. The International Monetary Fund, in a separate report on Monday, said medium-term growth prospects had already slipped, and urged reforms that focus on structural barriers to growth, the eventual removal of fuel subsidies, greater labor market flexibility, rationalizing the trade and investment regime, and deepening financial markets. "Growth over the medium term is expected to average 6 percent...lower than the 6.5-7 percent projected during the last consultation, owing mainly to tighter financial conditions, weaker global prospects, and persistent supply bottlenecks," the IMF said. For next year, the IMF forecasts were roughly in line with those of the Indonesian authorities: a current account deficit staying above 3 percent of GDP, and GDP growth slowing to 5-5.5 percent. In a nod to criticism of the government's slow pace of reform, the IMF also said fiscal policy had to support the current focus of monetary policy on easing pressure on the balance of payments. "Recent market volatility and (foreign exchange) reserve losses highlight the need to deal decisively with macroeconomic imbalances and contain financial stability risks. The current delay in tapering of...(Fed) policies provides an opportunity to strengthen policy and financial buffers and improve market perceptions," it said. Indonesia's investment chief, Mahendra Siregar, told reporters he was confident foreign direct investment would be in line with expectations but acknowledged investor concerns over labor relations, infrastructure and law enforcement. (Reuters)