Indonesia on Track for Another Moody's Credit Rating Upgrade

Jakarta Globe, December 01, 2010     

Ratings agency Moody’s said on Wednesday that it was putting Indonesia on review for a possible credit rating upgrade thanks to its economic “resilience” and improved management of the national finances.

A worker carrying wooden planks at an apartment
 construction site in Jakarta in April. Ratings agency
 Moody’s said on Wednesday that it could upgrade
Indonesia's credit rating, citing the country's economic
 'resilience' and improved management of the
 national finances. (AP Photo/Tatan Syuflana)    

In a statement from Singapore, the agency said it was reviewing the government’s Ba2 foreign and local-currency bond ratings after placing them on a positive outlook in June.

An upgrade of one notch to Ba1 would leave Southeast Asia’s biggest economy in “speculative grade” but just one rank below “investment grade,” providing encouragement to foreign investors.

Moody’s cited Indonesia’s economic resilience accompanied by “sustained macroeconomic balance,” its healthy debt position and the central bank’s improving foreign currency reserve adequacy.

It also said the government’s “policy framework remains increasingly well positioned to deal with evolving macroeconomic challenges and potential shocks.”

“We have now placed the sovereign credit ratings and country ceilings on ‘Review for Possible Upgrade’ as the economic recovery is being sustained alongside well managed external accounts and reasonably good inflation fundamentals,” Moody’s vice president Aninda Mitra said.

He said improved foreign currency reserves and falling government debt were “reducing risk perceptions and encouraging greater inflows of foreign direct investment and long-term capital.”

Monetary stability and policy flexibility were also helping to reduce the inflation risks associated with sharply increased inflows of foreign capital in recent months.

Steady monetary policy to keep a check on inflation, which rose to a higher-than-expected 6.33 percent in November, would be one criteria for a positive review outcome, Mitra added.

Indonesia is forecasting growth of around 6.0 percent this year after emerging almost unscathed from the global financial crisis, thanks to surging domestic demand and commodities exports.

“We’re on the right track. It’s only a question of time when Indonesia will receive the investment grade from the rating agencies,” IndoPremier Securities fund manager Suherman Santikno said. 

Agence France-Presse