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lthough Indonesia’s economic fundamentals remain among the strongest in Asia, “political noise” ahead of the 2014 elections may affect the country’s economic growth, an international ratings agency has warned.

Speaking at a press briefing in Jakarta on Thursday, Christian de Guzman, a vice president and senior analyst with Moody’s Sovereign Risk Group, said that “political noise” might lead to more policy and regulatory uncertainties, which could in turn affect the investment climate.

Moody’s has upgraded Indonesia’s credit rating five times over the last six years, and the ratings agency says it is “unlikely any upgrade [will be made] over the next 12-18 months”, mostly due to the political climate.

 “That’s got a lot to do with political uncertainties and regulations [in the lead-up to the elections] that may have an effect on the investment climate,” he said. “And much of the noise will probably persist through next year’s elections,” he added.

Indonesia is slated to hold its third presidential election in 2014 as well as legislative elections and observers fear that policymakers — especially those affiliated with political parties — may lean toward more populist policies and avoid making necessary reforms.

The government’s failure to raise petroleum prices in April last year meant that President Susilo Bambang Yudhoyono’s administration “missed the window to reform the energy subsidies” that put pressure on the country’s fiscal sustainability, said de Guzman.

The imminent elections may also fuel growing nationalist sentiment, which came to light leading up to the disbandment of upstream oil and gas regulator BPMigas. De Guzman said that he “would not be surprised” if in the near-future, cases similar to BPMigas emerged, causing further legal uncertainty for prospective investors.

Despite all its concerns about the country’s political climate, Moody’s believes that Indonesia should be able to maintain its impressive economic achievements, thanks to its strong growth in consumer spending and investment. The ratings agency forecasts the country’s economy will expand by at least 6 percent in 2013.

“By and large, despite all the noises and pressure, Indonesia’s numbers continue to look good compared to its peers,” said de Guzman.

Overall, Indonesia’s macroeconomic fundamentals remained in “healthy” shape despite recent concerns about the rupiah’s depreciation and the current account deficit, he added.

Moody’s, one of the so-called “Big Three” ratings agencies, granted Indonesia an investment grade status (Baa3) earlier last year. The investment grade status helped the country to attract an influx of both portfolio and direct investments from offshore investors.

The Jakarta Composite Index (JCI) stood at 4,300 by the end of December last year, a 13 percent gain on the previous year’s figure. Meanwhile, foreign direct investment realization in Indonesia in 2012 stood at a historic high of Rp 221 trillion (US$22.8 billion), jumping 26 percent compared to a year earlier.

Robust investment figures have helped cushion Indonesia’s consumer-driven economy from the global downturn that has put pressure on its exports. Indonesia has successfully retained its six-plus percent economic growth for eight consecutive quarters since Oct. 2010, having expanded 6.17 percent in the third quarter last year.

Government officials have estimated Indonesia’s annual economic growth rate in 2012 was 6.3 percent — a figure that, if correct, would be the second-highest among G-20 members after China. Moody’s says that certain Indonesian companies will capitalize from the continuing trend of such robust economic expansion.

The ratings agency sees a “stable” outlook for corporations in the sectors of exploration and production, refining and marketing, power utilities, telecommunications and marketing. Meanwhile, it gives a “negative” outlook for firms focusing on industries such as coal mining and shipping. (sat)