Fitch affirms RI sovereign ratings<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
In its first assessment of Indonesia since the Bali attack in
\nOctober, London and New York-based Fitch Ratings has affirmed its
\nlong-term foreign and local currency sovereign rating at \"B\",
\nwhich implies a stable outlook.<\/p>\n
In a media release on Monday, the agency argued that the broad
\nthrust of restructuring and fiscal consolidation, which had
\nunderpinned Fitch's upgrade of Indonesia's ratings earlier this
\nyear, remained intact and that only a very deep and prolonged
\nloss of confidence or renewed political instability would put
\npublic debt sustainability at risk.<\/p>\n
\"Early indications suggest that the fallout from the Bali
\nattack should be containable.<\/p>\n
\"Nonetheless, the incident seems certain to exact some cost in
\nterms of delayed recovery from the Asia crisis, reduced investor
\nconfidence and a weaker balance of payments,\" Fitch said.<\/p>\n
Affirmation of the ratings and the outlook recognized the
\ngovernment's prompt response in confronting terrorism
\ndomestically since the Bali bombings and forcefully restating its
\ncommitment to macroeconomic stabilization and reform, most
\nnotably in a recent supplementary letter of intent to the IMF, it
\nsaid.<\/p>\n
President Megawati Soekarnoputri's position still looked
\nsecure and her genuine popularity, coupled with continuing
\ninternal divisions among her opponents, suggested the 2004
\npresidential election was hers for the taking, it said.<\/p>\n
Arguably, the terrorist incident has strengthened her hand
\ndomestically, but Fitch hesitated to discount the significant
\nrisks that may remain ahead of 2004, as she continued to steer a
\nnarrow path between pro-Islamic and pro-Western factions.<\/p>\n
Despite encouraging external trade data for October, Fitch
\nsaid it was too early to assume that the economy would simply
\nshrug off the Bali attack, and growth in 2002 might do no better
\nthan match the 3.3 percent of 2001.<\/p>\n
It said recently revised official macroeconomic forecasts for
\n2003 represented a more sober assessment of the short-term
\noutlook and formed the backdrop to a slight easing of fiscal
\nretrenchment in 2003 and a higher budget deficit of 1.8 percent
\nof GDP, up from an originally budgeted 1.3 percent, aimed chiefly
\nat bringing relief to Bali.<\/p>\n
\"Yet the authorities could hardly be accused of abandoning
\nfiscal consolidation: better-than-expected budget outcomes for
\n2001 and 2002 to date have dispelled fears of fiscal indiscipline
\nand allayed concerns that public debt could be on an explosive
\npath,\" Fitch said.<\/p>\n
Having peaked at close to 90 percent of GDP in 2000 to 2001,
\nFitch expected central government debt per GDP to fall to 73
\npercent by the end of 2002 and 68 percent by the end of 2003.<\/p>\n
Fitch believed the main impact of the Bali attack would be
\nfelt on the balance of payments. For 2003, the agency was
\nassuming a 30 percent drop in tourism receipts, roughly in line
\nwith Indonesia's experience following the riots of May 1998,
\nreducing the current account surplus to under US$5 billion, from
\nmore than $6 billion in 2002. The impact on foreign direct
\ninvestment promises to be less, primarily because it is already
\nrunning well below precrisis levels.<\/p>\n
\"Even so, signs of a nascent recovery in investor sentiment
\nearlier this year could now be at risk,\" it said.<\/p>\n
While the Bali bombing could knock the economy sideways, Fitch
\ndid not expect it to go into a tailspin. Recent improvements in
\npolicy fundamentals should put a floor under the currency,
\nreinforced by a resilient current account surplus and US$30
\nbillion of international reserves.<\/p>\n
Moreover, it said, very little of the nation's external
\nfinancing gap was met from market sources, insulating it from any
\nbroader deterioration in emerging market investor sentiment.<\/p>\n
Aid donors have already indicated their support for Indonesia
\npost-Bali and it seems highly likely that Indonesia could secure
\nadditional IMF support if necessary, according to Fitch.<\/p>\n
\"Further rating actions will hang upon evidence of sustained
\neconomic recovery and restructuring, continued budgetary
\ndiscipline and lasting improvements in the public and external
\ndebt ratios,\" it said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/fitch-affirms-ri-sovereign-ratings-1447893297",
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"sponsor": "Okusi Associates",
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