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ndonesia's foreign and local currency sovereign debt rating has been upgraded from Ba3 to Ba2 by Moody's Investors Service as the economy remains resilient despite the global economic slowdown.

"The upgrade was prompted by the Indonesian economy's relatively strong resilience to the global recession as well as its healthy medium-term growth prospects," Aninda Mitra, Moody's vice president and sovereign analyst for Indonesia, said in an statement Wednesday.

"An upswing in economic activity to its recent rate of 5.5 percent is expected to remain in 2010 and Indonesia's overall dynamic growth is better positioned to face medium-term global uncertainties than many of its Ba-rated peers, as well as most regional economies," he said.

"Indonesia's macroeconomic management is also improving and its appropriate policy stance is expected to persist in the foreseeable future," he added. "These developments highlight the growing credibility and predictability of government policies and are expected to ensure macroeconomic stability."

Moody's last rating of Indonesia was taken on June 11, when the outlook on the Ba3 sovereign rating was changed to positive.

The economy grew by 4.2 percent in the first half of this year as compared to the same period in 2008, according to the Central Statistics Agency (BPS). The government expects the economy to grow by 4.3 percent this year.

Similarly, the World Bank on Tuesday revised its growth forecast for Indonesia's economy from 3.5 to 4.3 percent.

Rahmat Waluyanto, the Finance Ministry's director general of debt management, welcomed the good news, saying the upgrade was an acknowledgement of the success of the fiscal and monetary authorities in safeguarding the economy from the negative impacts of the economic crisis.

"Our cost of funds will be lower as risk premiums asked by bond investors and foreign debt creditors will drop," he said. "It is expected that bank lending rates will also decline."

Lower lending rates may prompt businesses to start borrowing money for expansion, which will eventually spur growth.

Finance Minister Sri Mulyani Indrawati said if investment grew by between 3 and 4 percent in the third quarter this year as expected by the government, it would help to fuel growth.

"If that can be done, then there are already signs of economic recovery," she said. "We expect private consumption to remain strong and high, while investment will show signs of recovery, particularly supported by the global economic recovery and the positive sentiment in the stock market and government and corporate bonds."

The rupiah rose to an 11-month high, while stocks and bonds gained, after Moody's raised Indonesia's credit rating, Bloomberg reported.

The rupiah strengthened 2.3 percent to 9,695 per dollar at 4:15 p.m. in Jakarta, the strongest level since Oct. 15 last year. It was the biggest one-day gain since the 2.4 percent rise on April 30.

Meanwhile, the Jakarta Composite Index gained 0.8 percent to 2,439.35.