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Slow recovery could damage Indonesia’s credit rating, Moody’s warns
The ratings agency expects the country’s economy to contract by 2 percent this year and grow by 4.7 percent in 2021.
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Customers shop for Christmas decorations at a store in Asemka Market, West Jakarta, on Sunday. Vendors have reported a 50 percent drop in sales this year as a result of the pandemic. (JP/Wendra Ajistyatama)
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redit ratings agency Moody’s Investors Service has warned that Indonesia’s credit rating could be downgraded next year if there is a prolonged economic slowdown, a weakening policy framework or a deteriorating external position.
“The trigger for a [potential] ratings downgrade is coming from long-term stagnation in growth that could last beyond 2020 and 2021,” said senior Moody’s analyst Anushka Shah at a media briefing on Tuesday.
“In the absence of either an upturn in consumption or investment growth, government spending will actually remain the main factor driving headline GDP [gross domestic product].”
The ratings agency expects Indonesia’s economy to contract by 2 percent this year, followed by a 4.7 percent rebound over the course of 2021.
However, Shah said, actual growth would depend on the government’s pandemic management and the magnitude of government spending, among other factors.
Indonesia fell into recession for the first time in two decades this year as the COVID-19 pandemic, and the social restrictions that followed, took a great toll on economic activity.
As the country’s GDP fell by 3.49 percent annually in the third quarter, household spending, which accounts for more than half of GDP, fell 4.04 percent year-on-year, Statistics Indonesia (BPS) data shows.
