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S&P, Fitch hold Indonesia’s credit rating with mixed outlook
The ratings are key for the government as it seeks to raise funds, primarily through the bond market, to finance its multibillion dollar economic recovery program that includes the national vaccination program.
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Worse than expected: An office worker uses his smartphone at Muamalat Tower in Jakarta on Wednesday. Indonesia will likely see further economic contraction in the third quarter as the country has recorded a decline in three consecutive months for the first time since the 1997 Asian financial crisis, signaling weak purchasing power. (JP/Seto Wardhana)
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redit rating agencies Standard and Poor’s (S&P) and Fitch have kept Indonesia’s long-term rating at BBB but are split over the country’s economic outlook due to pandemic-related uncertainty.
S&P reaffirmed Indonesia’s rating with a negative outlook on April 22 because of the continued downside pressure on the country’s external, fiscal and debt setting, despite signs of economic stabilization and improved trade flows.
Meanwhile, Fitch reaffirmed Indonesia’s rating with a stable outlook on March 22 as a balance between the country’s favorable medium-term growth outlook and relatively low debt against its high reliance on external financing and low state revenue.
“The affirmation is recognition of international stakeholders over the macroeconomic stability and the economic prospects both in the short and medium term,” read a Finance Ministry press release about the ratings published on April 22.
The two multinational agencies’ ratings are key for the government as it seeks to raise funds, primarily through the bond market, to finance its Rp 699.43 trillion (US$48.3 billion) economic recovery program that includes the national vaccination program.
Indonesia has lifted its longstanding 3 percent budget deficit cap until 2022 to enable it to raise funds and issue many tax incentives to stimulate economic activity.
However, S&P wrote that, due to the two initiatives, the country would also “face sustained fiscal and external pressures related to the COVID-19 pandemic over the next 12-24 months.”
