BI Governor: S&P Affirmation Reflects Maintained Global Confidence

Bank Indonesia (BI) Governor Perry Warjiyo stated that S&P Global Ratings’ affirmation of Indonesia’s sovereign credit rating at BBB with a stable outlook reflects the maintained confidence of international stakeholders in the country’s macroeconomic stability. Furthermore, the affirmation from the rating agency is seen as reflecting sustained confidence in Indonesia’s solid economic growth prospects. “This is supported by the close synergy of the policy mix between the Government and Bank Indonesia in strengthening stability and encouraging domestic economic growth amidst persistently high global uncertainty,” Perry said in a statement received in Jakarta on Tuesday. BI stated it remains committed to strengthening the monetary, macroprudential, and payment system policy mix to bolster stability and support sustainable economic growth. Going forward, BI will also continue to strengthen policy coordination with the Government, including close synergy between monetary and fiscal policy to mitigate the impact of global uncertainty due to the war in the Middle East on the domestic economy, ensuring stability and economic growth remain well maintained. Policy synergy with the Financial System Stability Committee (KSSK) is also being tightened to help maintain financial system stability and encourage financing for the Government’s Asta Cita programmes. Previously on Monday (13/7), S&P Global Ratings affirmed Indonesia’s sovereign credit rating at BBB with a stable outlook. This reflects the maintenance of Indonesia’s investment grade status. The affirmation is supported by the expectation that the weakening of fiscal and external indicators is temporary and will improve as the direction and implementation of government policy become more stable. The stable outlook reflects the expectation that state revenues will continue to recover this year, while export revenues will increase as commodity prices improve. The government’s policies to increase state revenues and export performance from the natural resources sector are also expected to support increased revenues in the medium term, especially if policy changes become more predictable and are implemented effectively. The stable outlook also reflects the expectation that the government remains committed to maintaining the fiscal deficit below 3 percent to preserve fiscal sustainability. Looking ahead, S&P indicated that Indonesia’s sovereign credit rating could potentially be upgraded if the structural strengthening of fiscal and external indicators continues. From the fiscal side, this is supported by a sustained reduction in the fiscal deficit through a significant increase in state revenues, declining financing costs, and exchange rate stability. Meanwhile, from the external side, a rating upgrade needs to be supported by improving indicators, including a reduction in external debt and gross external financing needs.