INDONESIA: Moody’s Upgrades Indonesia’s Rating to Baa2, Outlook Change to Stable

Friday April 13 2018

On 13^th April 2018, Moody’s Investors Service (“Moody’s”) upgraded the Government of Indonesia’s long-term issuer and senior unsecured ratings to Baa2 from Baa3. The outlook was changed to stable from positive.

This upgrade to Baa2 is underpinned by an increasingly credible and effective policy framework conducive to macroeconomic stability. This was achieved through implementation of financial buffers, prudent fiscal and monetary policy, this  strengthens Moody’s confidence that the sovereign’s resilience and capacity to respond to shocks has improved. As a result, Indonesia’s credit metrics are more comparable to sovereigns at the Baa2 level.

Moody’s expects that the focus of Indonesia’s fiscal and monetary policy around preserving macroeconomic stability and building financial buffers that has become increasingly apparent in recent years will remain. These policies and larger financial reserves are strengthening Indonesia’s capacity to respond to shocks.

The stable outlook reflects balanced risks at Baa2. The stable outlook incorporates downside risks from political challenges to the implementation of further broad economic, fiscal and regulatory reforms. Moody’s anticipates   that effective reforms will proceed relatively slowly, particularly as such reforms  will precede next year’s elections.

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