Fitch Document Circulates, Highlights Indonesia's Economic Situation

Jakarta, CNBC Indonesia - Markets were surprised by the circulation of a document from the global credit rating agency Fitch Ratings stating that it has lowered the outlook or projection of Indonesia’s debt rating from stable to negative on Wednesday, 4 March 2026. Although it has cut Indonesia’s debt outlook, Fitch in the document nonetheless maintained the BBB rating or investment grade.

In its note, Fitch revealed that the revision of the outlook on Indonesia’s debt rating reflects increasing policy uncertainty and concerns about eroding the consistency and credibility of Indonesia’s policy mix amid rising centralisation of policy-making powers.

“The heightened risk is exemplified by the inclusion of a review of the State Finance Law in the government’s legislative priority list for 2026,” Fitch wrote in its report received by CNBC Indonesia, on Wednesday, 4 March 2026.

Fitch warned that a revision to the State Finance Law could loosen the fiscal framework that has long been in place, including the 3% deficit ceiling.

“It is likely to erode policy credibility and the ability to finance a higher fiscal deficit without support from the central bank,” Fitch wrote in the document.

Fitch also projected a fiscal deficit of 2.9% of GDP in 2026, unchanged from 2025 and above the government’s target of 2.7%. This condition was driven by still moderate government revenues.

“This reflects our more conservative revenue assumptions based on slower growth projections and the moderate short-term impact of efforts to improve tax compliance,” it said.

Additionally, on the revenue side, efforts to boost economic growth and ease social tensions still present after last year’s protests will drive higher social spending, including a free nutritious meals programme.

“The plan to prioritise expenditure in the first half of 2026 could add to the fiscal deficit risk,” Fitch said.

Furthermore, Fitch projected general government debt would rise slightly to 41% of GDP in 2026, below the BBB rating’s median projection of 57.3%.

“We expect the debt ratio to remain broadly stable in the medium term, reflecting our current assumption that the government will comply with the fiscal deficit cap,” Fitch said.

Nonetheless, Fitch noted that interest payments are projected to amount to about 17% of government revenue in 2025, among the highest within the BBB category.

CNBC Indonesia sought to obtain confirmation from Fitch Ratings in Singapore. As of this report, Fitch had not issued a statement.