Indonesia wins Fitch ratings upgrade in welcome boost to reform efforts

Fitch lifted Indonesia's long-term, foreign currency-denominated debt ratings to "BBB" from "BBB-", with a stable outlook.
Fitch lifted Indonesia's long-term, foreign currency-denominated debt ratings to "BBB" from "BBB-", with a stable outlook.PHOTO: REUTERS

JAKARTA (AFP) - The Fitch ratings agency raised Indonesia's sovereign rating to its second-lowest investment grade Thursday (Dec 21), providing a welcome boost to reform efforts in South-east Asia's largest economy.

The move reflected Indonesia's improved ability to weather external shocks, after years of slowing economic growth hampered by falling global demand for the country's key commodities exports, the agency said.

Fitch lifted Indonesia's long-term, foreign currency-denominated debt ratings to "BBB" from "BBB-", with a stable outlook.

It noted in a statement that Indonesia's "macroeconomic policies have consistently been geared towards maintaining stability", with strong foreign cash reserves also a key factor.

The upgrade comes after Standard & Poor's raised Indonesia's sovereign credit rating from junk status to investment grade in May.

President Joko Widodo has been seeking to attract more foreign investment and strengthen economic performance despite the commodities downturn.

Indonesia's share market and currency surged on news of the decision.

Fitch praised the country's recent structural reforms, which have boosted Indonesia 37 places to 72nd in the World Bank's Ease of Doing Business rankings in two years.

Strong GDP growth of about 5.1 per cent on average over the past five years and adherence to a deficit target of 2.8 per cent were also factors in the decision.

But Indonesia still faced challenges, the agency said, including its dependence on commodities and "very low" revenue intake.

The potential for domestic political turmoil as the country approaches elections also posed a risk, Fitch said.