Indonesia's credit rating outlook may be reviewed: S&P<\/p>\n
Linus Chua and David Yong, Bloomberg, Singapore\/Kuala Lumpur<\/p>\n
The\"positive\" outlook on Indonesia's credit rating may be
\nreviewed by Standard & Poor's following the \"sharp\" decline in
\nthe nation's currency, the credit rating company said.<\/p>\n
The rupiah is set for its biggest monthly slide since October
\n2001 on concern record oil prices will force the government to
\npay more for fuel subsidies. S&P said it has factored in
\nIndonesia's fuel subsidy in the country's B+ rating, which is
\nfour levels below investment grade.<\/p>\n
Indonesian President Susilo Bambang Yudhoyono may on Wednesday
\nannounce cuts to the subsidies as part of a plan to support the
\nrupiah, which yesterday halted an eight-day slide that pushed the
\ncurrency to a four-year low of 11,800. S&P said Indonesia needs
\nto address its fuel subsidy amid rising oil prices.<\/p>\n
\"The increased pressure placed on the economy by higher oil
\nprices and the weaker rupiah may cause Standard & Poor's to
\nreview the positive rating outlook on the Indonesian government,
\nif the underlying causes are not promptly addressed by a credible
\nset of policy measures,\" Agost Benard, a credit analyst at S&P,
\nsaid in a statement today. The rupiah's decline \"underscores the
\nurgency of addressing the fuel subsidy issue.\"<\/p>\n
The credit rating company also said that Indonesia's economy
\nis structurally more robust compared with the 1997-1998 Asian
\nfinancial crisis, adding that it expects \"improvement\" in the
\neconomy in the \"medium term.\" Still, it said the banking industry
\nfaces risks from the falling currency.<\/p>\n
Government fuel subsidies may balloon 90 percent to Rp 145
\ntrillion (US$14 billion) this year because of soaring
\ninternational prices, Yudhoyono said Aug. 16. Crude oil for
\nOctober delivery today rose as much as 1.2 percent to $70.63 a
\nbarrel in after-hours electronic trading on the New York
\nMercantile Exchange. It was at $70.54 at 8:33 a.m. London time.
\nYesterday, it reached $70.85, the highest since the contract
\nstarted trading in 1983.<\/p>\n
Moody's Investors Service however said it may not change the
\nnation's credit ratings and outlook because the budget deficit is
\nmanageable and economic growth is still reasonable.<\/p>\n
Indonesia's B2 rating, which is five levels below investment
\ngrade, \"can stand some volatility,\" Steven Hess, a New York-
\nbased analyst for the rating company, said in an e-mailed reply
\nto Bloomberg today.<\/p>\n
A major drop in its international reserves may be the trigger
\nfor a review of the nation's rating outlook, Hess said.<\/p>\n
The ratio of government debt to GDP has dropped quite steeply
\nsince it peaked at about 100 percent in 2000, Hess said. Moody's
\nhad a forecast for the end of this year of a ratio of about 56
\npercent, he said. As a result of the rupiah's decline, the ratio
\nof government debt to gross domestic product may be a couple of
\npercentage points higher, he said.<\/p>\n
Even if the budget deficit is double the government's revised
\ntarget of 1 percent of GDP, it is still compatible with a decline
\nin the debt ratio, Hess said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indonesias-credit-rating-outlook-may-be-reviewed-sp-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}