Financial markets this year have been very focused on monetary and fiscal policy responses to external developments. Counter-cyclical policies undoubtedly have critical roles to play in Indonesia to support sustainable growth and price stability, especially in the current uncertain environment. By navigating and balancing elevated external risks against domestic considerations, policymakers have gained credibility, which investors have rightfully acknowledged. Standard & Poors upgraded Indonesia’s sovereign credit rating by one-notch to BBB in May, citing in part supportive policy dynamics. The Finance Ministry has opted to keep the fiscal deficit initially at 1.8 percent of gross domestic product (GDP) this year (unchanged from last year), despite the elections in April, arguing that it doesn’t want to add to the political uncertainty by running a highly expansiona...

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