Standard and Poor's gives positive outlook on RI ratings<\/p>\n
Dadan Wijaksana and Fabiola Desy Unidjaja, Jakarta<\/p>\n
Global rating agency Standard and Poor's (S&P) may upgrade
\nIndonesia's sovereign credit ratings in the near future after it
\nrevised on Wednesday the outlook of the ratings to positive from
\nstable.<\/p>\n
But S&P said that the rating upgrade would depend on the
\nperformance of the next government in implementing key economic
\nreform programs.<\/p>\n
"Looking ahead, the country's credit ratings could improve if
\nthe new government demonstrates its resolve for the continued and
\ntimely implementation of reforms," S&P credit analyst Agost
\nBenard said in a press statement.<\/p>\n
Indonesia's foreign currency rating of B is well below the
\ncredit rating of other neighboring countries like Thailand,
\nSingapore and Malaysia.<\/p>\n
An upgrade in the credit ratings would help improve investor
\nconfidence in the country, which badly needs new investments to
\nbolster economic growth.<\/p>\n
Some analysts expected S&P to upgrade the country's ratings
\none notch to B+ by the end of the year. The rating upgrade
\nnormally follows a upward revision in the rating outlook.<\/p>\n
But such a rating is still below the investment grade rating
\nof BBB, achieved by the country before the 1997-1998 financial
\ncrisis.<\/p>\n
S&P said the outlook revision reflected continuing progress in
\nthe country's several key macroeconomic indicators, particularly
\na stable exchange rate, falling inflation and lower interest
\nrates.<\/p>\n
"Further progress in these areas could help reduce the
\nvulnerability of the government's fiscal position," Benard said.<\/p>\n
Not only has the government managed to gradually reduce its
\nbudget deficit and public debt-to-GDP ratio, it has also managed
\nto improve its external liquidity.<\/p>\n
By the end of the year, Indonesia's foreign exchange reserves
\nshould reach some US$35 billion -- sufficient to cover the
\npayments of around six months of imports, S&P said.<\/p>\n
The news from S&P has help improved sentiment in the local
\nstock market and the rupiah, which earlier this week had been
\nunder strong pressure amid political uncertainty at home ahead of
\nthe July presidential election and a possible hike in the U.S.
\nFederal Reserve's interest rate.<\/p>\n
The rupiah closed higher at Rp 8,940 per U.S. dollar on
\nWednesday from Rp 9,000 the previous day, while the Jakarta Stock
\nComposite Index jumped by 3.6 percent to 744.291.<\/p>\n
Elsewhere, despite the progress in the Indonesian economy,
\nsome negative issues were also noted by S&P.<\/p>\n
At the moment, the country's economic growth was still below
\nits potential and relatively lagging behind its regional peers,
\nit said, referring to Indonesia's modest rate of growth in the
\npast three years, largely because of investment woes.<\/p>\n
For this year, the government expects the economy to expand by
\n4.8 percent.<\/p>\n
Benard said that the potential to grow faster would be based
\non continued broad-range of reform, "particularly in the
\njudicial, legal and labor sector," to boost the investment
\nclimate.<\/p>",
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