Indonesia wins Moody’s rating upgrade

Jakarta (Indonesia) (AFP) – Indonesia won a credit rating upgrade from Moody’s on Friday, with the agency lauding central bank and government policies for boosting confidence in Southeast Asia’s biggest economy.

The upgrade — after similar moves by other ratings agencies — comes at a good time for Indonesia’s president Joko Widodo. Boosting growth is at the centre of what could be a tough re-election bid in next year’s presidential ballot.

Indonesia’s efforts at keeping budget deficits and inflation under control were behind Moody’s boosting its rating to Baa2 from Baa3, and bumping its outlook to stable, it said.

A better credit rating tends to lower a country’s borrowing costs and can make it more attractive to investors.

“Together with a build-up of financial buffers, prudent fiscal and monetary policy strengthens Moody’s confidence that (Indonesia’s) resilience and capacity to respond to shocks has improved,” the ratings agency said.

Fitch echoed that sentiment in December when it also boosted Indonesia’s sovereign rating, saying economic reforms meant the country could better weather external shocks.

That came after Standard & Poor’s raised Indonesia’s credit rating from junk status to investment grade.

Monday’s upgrade comes after growth picked up slightly last year on the back of the central bank repeatedly slashing interest rates.

The economy expanded by 5.1 per cent year-on-year in 2017, up from 5.0 per cent growth in 2016, although it was still well below Widodo’s target of 7.0 percent.

Indonesia’s leader has launched an ambitious bid to upgrade the country’s creaking infrastructure and boost tax revenue, but the sprawling nation still struggles with endemic corruption, poverty and lacklustre education standards. 

Some analysts have cautioned that Indonesia’s commodities-driven economy could take a hit this year as prices for palm oil and coal are expected to be under pressure.