Update COVID-19 in Indonesia: 29,521 confirmed infections, 1,770 deaths (5 June 2020)
05 June 2020 (closed)
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Global credit rating agency Fitch Ratings maintained Indonesia's sovereign credit rating at BBB-/stable outlook in May 2016. BBB- is the lowest notch within the investment grade category. In a statement released on Tuesday (24/05) Fitch Ratings expressed that Indonesia's low public debt (at 26.8 percent of gross domestic product), limited risks in the banking sector, and the economic growth outlook at 5.1 percent (y/y) in 2016 amid global challenges were all factors that supported the decision of the credit rating agency to keep Indonesia on investment grade status.
Although Fitch Ratings acknowledges Indonesia's economic resilience against ongoing global challenges, the rating agency also stated that Indonesia is not free from such external influences. For example, so far in May foreign investors have been net sellers in Indonesia's bond market.
Fitch Ratings also advises Indonesian authorities to remain committed to the reform program. Since September 2015 the government has been implementing a series of structural reforms through the economic policy packages. According to Fitch Ratings these packages contribute to an improving investment climate in Southeast Asia's largest economy. For example, the new formula to determine minimum wage growth or the deregulation measures that cut the time required to arrange investment permits are reforms that enhance the nation's investment climate. Moreover, by revising the Negative Investment List the government shows that it welcomes foreign investment. This will also have a positive impact on rupiah exchange rate stability.
Bank Indonesia Governor Agus Martowardojo said the affirmation of Fitch Ratings is evidence that Indonesia is strong enough to adapt to - and face - both global and domestic economic challenges. The affirmation also shows that Indonesian authorities are on the right track in terms of policy reforms as well as prudent fiscal management, paving the way for sustainable economic growth. The central bank's Executive Director of the Communication Department Tirta Segara said Bank Indonesia issued regulations to manage foreign debt for non-bank corporations that adopt a more flexible exchange rate, allowing Indonesia to maintain adequate foreign exchange reserves.
While Fitch Ratings and Moody's Investors Service promoted Indonesia's credit rating to investment grade in 2011 and 2012, respectively, Standard & Poor's (S&P) is yet to give investment grade status to Indonesia. In May 2015 S&P revised the nation's outlook from BB+/stable to BB+/positive implying that Indonesia's status could be raised to investment grade within one year. This positive outlook comes on the back of greater policy effectiveness and predictability causing expanded fiscal and reserve buffers, hence enhancing external resilience. One decisive factor that was well-received by S&P was the decision of the Indonesian government to cut the generous energy subsidies and increase its focus on infrastructure development.
Credit Ratings Indonesia:
|Standard & Poor's||Fitch Ratings||Moody's|
Source: Investor Daily