Japanese agency upgrades RI credit rating

The Japan Credit Rating Agency, Ltd. (JCR) has raised Indonesia’s rating to investment grade, a move the central bank expects to be followed by other international rating agencies.

Indonesia’s foreign currency long-term senior debt has been upgraded from BB+ to BBB- and local currency long-term senior debt from BBB- to BBB, Bank Indonesia said in a statement Tuesday. Both outlooks are stable.

JCR cited five contributing factors to the upgrade: Increasing political and social stability, continuous economic prospects supported by strong domestic demand, declining public debt burden due to prudent fiscal management, better resilience to external shocks with higher foreign exchange reserves, and the government’s efforts in improving infrastructure.

“These rating upgrades reflect better perceptions and valuations of rating agencies to Indonesia’s
economic situation, which has proved resilient. Investment grade rating will boost the confidence of foreign investors in Indonesia,” BI Deputy Governor Hartadi A. Sarwono said.

“With strategic and directed joint efforts, this step is expected to be followed by other international rating agencies.”

Indonesia’s economy grew 4.5 percent last year, the fourth-highest in Asia, despite the global economic downturn. This year it is estimated to expand 5.9 percent, the Finance Ministry said.

Mandiri Sekuritas economist Destry Damayanti said the upgrade was positive for Indonesia.

Southeast Asia’s largest economy “may be able to get cheaper funds from Japan”, which is Indonesia’s largest creditor, she said.

Destry added that other international rating agencies would soon rate Indonesia as investment grade.

In June, Moody’s Investors Service changed the outlook on Indonesia’s sovereign ratings to positive.

Standard & Poor’s in March raised Indonesia’s sovereign rating to two levels below investment grade as the economy booked high growth amid last year’s global economic downturn after Fitch Ratings in January upgraded Indonesia’s ratings to one level below investment grade.

Then finance minister Sri Mulyani Indrawati said Indonesia could reach investment grade within one year.