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Moody's shares S&P's positive RI outlook
International ratings agency Moodyâs Investors Service has followed Standard & Poorâs (S&P) in giving a positive view of Indonesia despite the countryâs economic slowdown and weak macro-economic fundamentals
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I
nternational ratings agency Moody's Investors Service has followed Standard & Poor's (S&P) in giving a positive view of Indonesia despite the country's economic slowdown and weak macro-economic fundamentals.
S&P upgraded its outlook for Indonesia's sovereign credit rating last week on 'improved policy credibility'.
Moody's announced on Thursday that it was maintaining Indonesia's credit rating at Baa3 and holding a 'stable' outlook on the country's sovereign credit rating.
A Baa3 rating indicates a relatively low-risk bond or investment, with banks allowed to invest in Baa3-rated bonds.
The stable outlook implied that the risks would be 'balanced' over the next 18 months, said Christian de Guzman, vice president and senior analyst at Moody's Sovereign Risk Group.
'The stable outlook reflects the continuation of relatively healthy fiscal deficit. That means fiscal deficit is well anchored,' he said, citing the 3 percent ceiling for the fiscal deficit, which also suggested a low debt level.
Guzman went on that the outlook also described 'a fairly comfortable state' in the country's balance of payment.
The Baa3 credit rating placed Indonesia in a relatively similar credit profile to other emerging economies, including India and Turkey, according to Moody's data.
The positive assessment by the two ratings agencies comes at a time when concerns linger over domestic economic management marked by slower economic expansion, unstable fiscal balance and a low level of foreign exchange (forex) reserves.
S&P earlier said it was setting Indonesia's credit rating at BB+, one notch below investment grade, but upgraded the outlook of Indonesia's sovereign credit rating to 'positive' from 'stable', opening a possibility for the country to obtain a rating upgrade in the next 12 months.
The outlook, according to the rating agency, represented its view on enhanced policy credibility attributed to efforts to bolster monetary and financial sector management along with economic performance.
Indonesia's economy grew by 4.7 percent in the first quarter of this year, its slowest pace in nearly six years. As of April, forex reserves remained at US$110.9 billion, sufficient to fund 6.9 months of imports.
However, the country's current account deficit in the first quarter improved to $3.8 billion, equal to 1.8 percent of gross domestic product (GDP), from $5.7 billion or 2.6 percent of GDP in the fourth quarter of last year.
Indonesia, Guzman added, might still see its current account 'under control' as imports continued their slow pace amid economic deterioration. Although the government's efforts to boost infrastructure development might trigger higher imports, that would not pose any serious threat to the current account deficit.
'Outside risk is the current account deficit. But we have yet to see evidence of the fiscal expenditure program and the infrastructure development program gaining traction, so at this point that's not something that poses a major risk,' he said.
