DAVOS-UPDATE 1-Indonesia trade min links speculation, inflation

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DAVOS, Switzerland Jan 28 (Reuters) - Indonesia's trade minister said on Friday financial speculation has fuelled volatility in the speculation of commodity prices, as emerging markets suffer from the threat of rising inflation.

Food inflation has been gripping emerging economies, kindling social dissent and threatening to derail economic growth if not kept in check.

"Is it because of supply and demand, or shortages or imbalances? That's one reason because of the effect of climate change on production, including natural disasters," Indonesian Trade Minister Mari Pangestu told Reuters Insider.

"The other factor is speculation -- financial flows going into the commodities market sharpening the fluctuation."

Indonesia is suspending import duties on rice, soybeans and what as part of government efforts to fight inflation.

Analysts are questioning whether the central bank's reluctance to hike interest rates in the face of rising inflation could undermine its credibility.

Pangestu said at the start of the month she expects non-oil and non-gas exports to grow by 12-15 percent in value this year as increasing investment in Southeast Asia's biggest economy expands its manufacturing sector.

Indonesia coordinates the G33 group of developing country agricultural producers who want to protect their farmers from the full impact of opening food markets.

But fears of inflation and food shortages are forcing it and other countries to slash barriers to food imports.

(Reporting by Jonathan Lynn; editing by Mark Heinrich)

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(Reporting by Jonathan Lynn; editing by Mark Heinrich)