Moreover, consumer spending in Indonesia is expected to rebound in 2017 - implying that we should expect improving sales of property, cars, motorcycles, and other consumer goods. There is more upside potential, says Moody's in a report published earlier this week, provided the rupiah exchange rate remains stable and fund repatriations under the tax amnesty program improve.

Meanwhile, commodity prices have shown a rising trend recently. Moody's noted that higher commodity prices will benefit the oil & gas, crude palm oil (CPO), and coal mining sectors. It stated that better-than-expected earnings in the upstream oil sector will encourage capital investment and acquisitions in the oil & gas sector. Meanwhile, the nation's state-owned companies will contribute to fund and execute key infrastructure projects. These project - as well as the government's 35,000 MW power plant program - are believed to cause the multiplier effect by boosting demand in the country's construction, building materials and heavy equipment sectors.

Considering expectations of improving earnings in 2017, Moody's maintained its stable outlook on most of Indonesian companies' bonds that are covered by the credit rating agency. Moody's covers 41 Indonesian corporations, 22 of which have investment grade status (mostly banks and financial institutions), while the remainder are at junk levels. Meanwhile, 32 companies have been assigned a "stable outlook", implying their bond ratings are expected to remain at current level in the medium term.

Examples of companies that have been assigned a Baa3/stable outlook by Moody's are energy company Pertamina, cement producer Semen Indonesia, natural gas transportation and distribution firm Perusahaan Gas Negara, and heavy equipment distributor United Tractors.

Regarding the propertysector of Indonesia, Moody's sees the continuation of weak marketing sales, while one-off transactions may become the main drive for revenue in this sector. Most of Indonesian property developers that are covered by Moody's are therefore assigned a credit rating below investment grade.

Moody's credit rating for Indonesia's sovereign bonds is set at Baa3 (investment grade) also with a stable outlook.

Credit Rating Indonesia:

     Standard & Poor's        Fitch Ratings            Moody's
Rating Outlook Rating Outlook Rating Outlook
Indonesia BB+ Positive BBB- Stable Baa3 Stable

Source: Standard & Poor's