RI credit rating goes up on resilience

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Fri, 06/12/2009 2:43 PM  |  Business

Moody's Investors Service has upgraded the outlook for Indonesia's sovereign rating from stable to "positive", a move confirming that the economy is seen as getting stronger, despite the global downturn.

"The improvement in the outlook was prompted by Indonesia's relatively strong growth prospects, and an increasingly effective macroeconomic policy framework," Aninda Mitra, Moody's vice president and sovereign analyst for Indonesia, said in a statement Thursday.

Along with the improvement in the sovereign credit rating outlook, Moody's has upgraded the outlook on the country's B1 foreign currency bank deposit ceilings from stable to positive. But Moody's has left the outlook for its Ba2 foreign currency country ceiling at stable.

Indonesia's economy showed 4.4 percent growth in quarter one of 2009 from a year earlier, says the Central Statistics Agency (BPS), just below India and China. This prompted the International Monetary Fund (IMF) to revise its growth forecast for Indonesia from 2.5 percent to between 3 and 4 percent.

Mitra said the country's relatively robust growth prospects were supported by strong domestic demand and a balanced economy, with an investment momentum that was less susceptible to external trade fluctuations or financial shocks.

The expected decline in debt-to-GDP ratio was another crucial factor supporting the outlook change, he added. Moody's also noted that Indonesia's overall political stability had improved and that this was not currently a rating concern.

"Moody's is only confirming what the government has been communicating all this time," Finance Minister Sri Mulyani Indrawati said. "Although the rating remains unchanged, the *positive' outlook portrays that potentially our economy, from the risk side, is a far smaller *risk* compared to benchmark neighboring countries."

"This means positively, there is a possibility for an upgrade ... Of course we expect that the Ba3 rating can be far better in the future."

Mulyani said the government had expected possibly less favorable conditions in Indonesia's economy, considering the impacts of the global economic downturn.

"But the pressures did not happen, did not materialize. What has happened is actually the opposite."

Indonesia composite index has risen 55 percent this year, and the rupiah, the best performing among 10 Asian currencies outside Japan this year, had strengthened to 10,068 per dollar at 12:06 p.m. in Jakarta, Bloomberg reported.

The central bank has cut its rate for seven straight months by 250 basis points to 7 percent to help boost consumption, which accounts for about 60 percent of GDP.

Moody's forecasts Indonesia's economy should grow by 4 percent this year. The government has a more optimistic growth estimate of between 4 percent and 4.5 percent this year, while the central bank forecasts growth between 3 percent to 4 percent, with a strong possibility of nearing the upper ceiling.

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