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View all search resultsMore doubt over RI credit rating as Fitch cuts view to negative
The outlook for Indonesia's credit rating has dimmed further as Fitch Ratings revised its view to “negative” from “stable”, adding to warnings over policy uncertainty following a similar downgrade from Moody’s.
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The entrance of Fitch ratings agency is seen on Aug. 8, 2011, in Paris. (AFP/Miguel Medina)
T
he outlook for Indonesia's credit rating has dimmed further as Fitch Ratings revised its view to “negative” from “stable”, adding to warnings over economic policymaking following a similar downgrade from Moody’s Ratings.
“The outlook revision reflects increasing policy uncertainty and erosion of Indonesia’s policy mix consistency and credibility amid growing centralization of policymaking authority,” reads a press release from Fitch published on Wednesday.
That policy environment “could weaken the medium-term fiscal outlook, undermine investor sentiment, and put pressure on external buffers”, according to the global rating agency.
Nevertheless, Fitch kept Indonesia’s credit rating at ‘BBB’, citing the country’s record in maintaining macroeconomic stability, favorable medium-term growth, a modest government debt-to-gross domestic product ratio and moderate external buffers.
“These rating strengths are constrained by a weak revenue intake, high debt servicing costs and lagging structural features, such as governance indicators compared with ‘BBB’ peers,” Fitch noted.
The agency said several factors could trigger a rating downgrade, including a buildup of macroeconomic vulnerabilities, for example from a further weakening policy framework.
In public finances, triggers could be a “material increase in the overall public debt burden”, including from a substantial rise in fiscal deficits, or the “materialization of contingent liabilities”.
