BI Governor: S&P Affirmation Reflects Maintained Global Confidence

Governor of Bank Indonesia (BI) Perry Warjiyo views the affirmation by S&P Global Ratings of Indonesia’s sovereign credit rating at BBB with a stable outlook as reflecting the continued preservation of international stakeholders’ confidence in Indonesia’s macroeconomic stability.

Furthermore, the rating agency’s affirmation is seen as reflecting sustained international stakeholders’ 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 driving domestic economic growth amid still-high global uncertainty,” said Perry in a statement received in Jakarta on Tuesday.

BI also stated its continued commitment to strengthening the mix of monetary, macroprudential, and payment system policies in reinforcing stability and supporting sustainable economic growth.

Going forward, BI will continue to strengthen policy coordination with the Government, including close synergy between monetary and fiscal policies, to mitigate the impact of global uncertainty arising from the war in the Middle East on the domestic economy, so that economic stability and growth remain well maintained.

Policy synergy with the Financial System Stability Committee (KSSK) will also be tightened to help safeguard financial system stability and encourage financing for the Government’s Asta Cita programme.

Previously, on Monday (13 July), S&P Global Ratings (S&P) affirmed Indonesia’s sovereign credit rating at BBB with a stable outlook. This reflects Indonesia’s maintained status in the investment grade category.

The affirmation is supported by expectations that the weakening of fiscal and external indicators is temporary and will improve as the government’s policy direction and implementation become increasingly stable.

The stable outlook reflects expectations that state revenue will continue to recover this year, whilst export receipts will increase as commodity prices improve.

Government policies to boost state revenue and export performance from the natural resources sector are also expected to support revenue improvement in the medium term, particularly if policy changes become more predictable and are implemented effectively.

The stable outlook also reflects expectations that the Government remains committed to keeping the fiscal deficit below 3 per cent to safeguard fiscal sustainability.

Going forward, S&P indicated that Indonesia’s sovereign credit rating could potentially be raised if structural strengthening of fiscal and external indicators continues.

On the fiscal side, this would be supported by a sustained reduction in the fiscal deficit through significantly increased state revenue, declining financing costs, and exchange rate stability.

Meanwhile, on the external side, an upgrade would need to be supported by improving indicators, including a decline in external debt and gross external financing needs.