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S&P revises up Indonesia's credit rating outlook to stable

S&P revises up Indonesia's credit rating outlook to stable

This aerial picture shows lighter than usual traffic near the landmark Hotel Indonesia roundabout in Jakarta on Sep 14, 2020. (Photo: AFP/Adek Berry)

JAKARTA: S&P Global Ratings on Wednesday (Apr 27) revised up its outlook for Indonesia's credit ratings to "stable" due to its economic recovery from the pandemic and better terms of trade, after putting the country on a "negative" outlook since April 2020.

Indonesia, the world's biggest exporter of thermal coal and palm oil as well as a major supplier of nickel, copper and tin, has been benefitting from the upswing in global commodity prices, including by posting record high exports.

"We revised the outlook to stable in recognition of Indonesia's improved external position and gradual progress toward fiscal consolidation," the ratings agency said in a statement issued late on Wednesday.

S&P was referring to the government's plans to reinstate a budget deficit ceiling of 3 per cent of gross domestic product after waiving it for three years to give the government room to increase spending and debt during the COVID-19 pandemic.

In 2020, the ratings agency put Indonesia on a negative outlook, which means it might downgrade the country's ratings as its next move, due to risks from the country's strong counter-cyclical fiscal measures.

S&P rates Indonesia's debt at BBB, on par with ratings awarded by two other major credit rating agencies Fitch and Moody's.

Indonesia's GDP growth is expected to accelerate to 5.1 per cent in 2022, versus 3.7 per cent in 2021, S&P said, noting that the conflict in Ukraine posed fresh risks.

It also praised the passage of the Job Creation law in 2020, which it said would help employment and foreign direct investment trends going forward, assuming the government could resolve legal challenges associated with the law.

Indonesia's Constitutional Court has said there were procedural flaws in how the law was handled and ordered the government to amend parts of it within two years.

Bank Indonesia Governor Perry Warjiyo said S&P's decision reflected confidence in Indonesia's economy despite geopolitical tensions over the conflict between Russia and Ukraine, a slowing global economy and rising inflation.

Source: Reuters/ng

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