Moody’s affirms Indonesia’s sovereign credit rating amid stable growth

first_imgIn a statement issued on Monday, the credit rating agency said the affirmation of the rating was attributed by several credit strengths, such as Indonesia’s stable economic growth rates and low government debt burden. It also lauded the government’s consistent fiscal discipline and effort to maintain macroeconomic stability.However, it addressed several challenges that loomed over the country’s credit, such as weak revenue base, reliance on external market funding sentiment and the economic structure’s vulnerability to the commodity cycle. Such challenges could put constraints on debt affordability, as well as its balance sheet and the economy to changes in foreign investor sentiment.“Despite the challenges, Moody’s expects reforms aimed at reducing several structural economic and fiscal constraints to continue, albeit at a gradual pace,” it said in the statement.Indonesia’s gross domestic product grew 5.02 percent last year, the slowest pace since 2015. The government has been pushing for regulation reforms to attract foreign investment and boost the country’s economic activity through omnibus bills, among other measures, aimed at cutting red tape. In the meantime, Moody’s stable outlook reflects balanced risks at the Baa2 ratings, mainly related to the pace and effectiveness of reforms. Should the reforms be more effective, it would improve competitiveness, raise growth potential and strengthen Indonesia’s external position, the agency wrote.However, it warned that significant delays or reversals in reforms “would risk undermining Indonesia’s growth potential and macroeconomic stability”.Read also: Fitch affirms Indonesia’s BBB rating with stable outlook, sees ‘structural weaknesses’In response to the rating affirmation, Bank Indonesia (BI) Governor Perry Warjiyo said the decision confirmed international stakeholders’ optimism with regard to Indonesia’s economic prospects amid persisting domestic and global challenges.He also attributed the positive economic prospect to the synergy between the central bank and the government in composing a policy mix to maintain macroeconomic stability and support the country’s growth. “Going forward, BI will monitor domestic and global economic development to utilize the room to apply an accommodative policy mix to control inflation and external stability, as well as support the country’s economic growth,” Perry said in the statement.  Topics :center_img International rating agency Moody’s Investor Service has affirmed its stable rating outlook for Indonesian government debts and maintained local and long-term issuer ratings at Baa2.The Baa2 ratings also apply to senior unsecured bonds, while medium-term notes and shelf registration programs were also affirmed at Baa2 and (P)Baa2, respectively.Read also: ‘We should be thankful’: Jokowi voices optimism despite slowing economic growthlast_img