Fitch Downgrades Indonesia's Debt Outlook to Negative, Rating Remains BBB

Fitch Ratings, the international ratings agency, has downgraded the outlook for Indonesia’s debt rating from stable to negative. However, the long-term external debt rating remains at BBB. In the report released on Wednesday (4 March 2026), Fitch attributed the change in the outlook to rising policy uncertainty and concerns over the consistency of economic policy. Such conditions are seen as potentially affecting investor confidence and the resilience of the external sector. The revision of the outlook reflects increased policy uncertainty and concerns about the consistency and credibility of the policy mix, Fitch wrote in its report. Fitch highlighted the ambitious economic growth targets and plans to increase social spending. It projects a 2026 fiscal deficit of 2.9 per cent of GDP, slightly above the government target of 2.7 per cent. If spending rises without a strong revenue response, fiscal space could be constrained. On the revenue side, Fitch estimates the government revenue-to-GDP ratio to be around 13.3 per cent in 2026–2027. This figure is far below the average for BBB-rated peers, which reach 25.5 per cent. This constrains the government’s fiscal flexibility. Although the outlook is negative, Fitch keeps the BBB rating as Indonesia’s economic fundamentals are still considered reasonably strong. Economic growth is projected to remain around 5 per cent in 2026–2027, higher than the median for BBB-rated peers. The government debt ratio is also expected to be around 41 per cent of GDP in 2026, still below the average for that group. Fitch also notes that Indonesia’s foreign exchange reserves are expected to cover around five months of external payments. However, there remains a risk of capital outflows if investor sentiment worsens.