Fitch upgrades RI ratings on economic progress<\/p>\n
I Made Sentana, Dow Jones\/Jakarta<\/p>\n
The government's policy direction and improvements to the
\nmacroeconomy received a vote of confidence Thursday, with Fitch
\nRatings raising the country's sovereign creditworthiness.<\/p>\n
Fitch upgraded Indonesia's long-term foreign and local
\ncurrency ratings to BB- from B+, and affirmed its short-term
\nrating at B. The outlook on the ratings remains positive.<\/p>\n
The international rating agency said the move was due to the
\ncountry's easing political risk, better policy initiation and
\ncoordination, anticipated bureaucratic and legislative reforms,
\nstronger economic growth and continued improvements in public and
\nexternal finances.<\/p>\n
\"The current phase in the political and economic cycle
\npresents the government with an important window of opportunity
\nto build on macroeconomics stability and mitigate pressures on
\nthe balance of payments and the public finances,\" Fitch said in a
\nstatement.<\/p>\n
Although Indonesia's ratings remain below investment grade,
\nFitch's action bodes well for the government's plan to sell
\nbetween US$1 billion and $1.5 billion of bonds in offshore
\nmarkets later this year, analysts said.<\/p>\n
\"The actual rating itself is not important; the uptrend is
\nmore important,\" said Fauzi Ichsan, an economist with Standard
\nChartered in Jakarta.<\/p>\n
The news boosted Indonesian assets. The main index of the
\nJakarta Stock Exchange posted a 1 percent rise after the
\nannouncement early Thursday, although profit-taking later shaved
\nsome of the gains.<\/p>\n
The $1 billion government bonds due 2014 were quoted at
\n101.75-102.50 following the Fitch news, up around 0.375 from
\nWednesday. The rupiah was flat at Rp 9,135 as dollar demand from
\nlocal companies ahead of the month's end prevented the local unit
\nfrom rising.<\/p>\n
The administration of President Susilo Bambang Yudhoyono has
\npromised to jump-start economic growth in Indonesia, which has
\nlagged that of its regional neighbors. The government pledged to
\nimprove the investment climate by fighting corruption, removing
\nlegal uncertainties, providing tax incentives to investors and
\ncutting bureaucratic red tape.<\/p>\n
\"By prioritizing structural adjustment, the government is
\nsending a strong signal that it is determined to reduce further
\nIndonesia's country risk profile,\" says Ai Ling Ngiam, associate
\ndirector in Fitch's Asian Sovereigns team, said in the statement.<\/p>\n
Fitch said the macroeconomic impact from tsunami-hit Aceh will
\nlikely be minimal, given that the province accounts for only 1.8%
\nof Indonesia's economy. Fitch forecasts Indonesia's economy to
\ngrow 5 percent this year, lower than the government's 5.5 percent
\ntarget.<\/p>\n
Indonesia's total losses and damages due to the disaster last
\nmonth are estimated at $4.5 billion.<\/p>\n
Lenders in the Paris Club have offered a debt moratorium to
\ncountries affected by the calamity.<\/p>\n
Fitch noted that falling debt service costs and accelerating
\neconomic growth provide more room for Indonesia's government
\ndebt-to-GDP ratio to fall to 55 percent in 2005, bringing it
\nclose to the 52 percent median for the BB rating category.<\/p>\n
But it said that a further ratings upgrade will depend on
\nclear signs that the government is delivering on its ambitious
\nreform agenda, maintenance of macroeconomics stability and
\ncontinued fiscal prudence.<\/p>\n
\"Conversely, failure to exploit the current window of
\nopportunity, leading to a weak reform agenda, could erode market
\nconfidence and sovereign creditworthiness over time.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/fitch-upgrades-ri-ratings-on-economic-progress-1447893297",
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"sponsor": "Okusi Associates",
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