Fitch ups RI rating outlook to 'positive'

The Jakarta Post, Jakarta

Global rating agency Fitch Ratings has raised Indonesia's rating outlook from stable to positive, as the nation's political risks had been reduced after the conclusion of the general and presidential elections.

The agency did not say when it would actually upgrade the nation's credit rating, but said in a statement that "Future rating upgrades lie in the formulation and implementation of a strong reform agenda."

Nevertheless, the completion of a six-month period of free and fair elections marked a major step forward for Indonesia, as it posed a very strong mandate for reform, it added.

Fitch last upgraded Indonesia's long-term foreign-currency rating in 2003 by one notch to B-plus, still four levels below investment grade.

Late last month, following the final round of the presidential election, rating firm Standard & Poor's said it might upgrade the country's rating on condition that the government continued efforts to bolster economic growth.

Indonesia took a major step this year as a democratic nation by holding its first direct presidential election on Sept. 20.

The General Elections Committee (KPU) officially named Susilo Bambang Yudhoyono victor over incumbent President Megawati Soekarnoputri on Monday, with inauguration scheduled for Oct. 20.

Fitch said an improved economy was another reason for its positive notes on Indonesia, citing the nation's steady economic growth and continued fiscal consolidation.

It added that Indonesia, whose economy is expected to grow by 4.8 percent this year, might contain its debt-to-gross domestic product (GDP) ratio at 68 percent, far below its peak of 100 percent in 2000.

Rating agencies are the latest to have expressed high hopes in Indonesia's future economy following the election.

Earlier, Morgan Stanley expressed confidence that the peaceful election and Susilo's emergence as the new president, would bring about improvement in the economy, which -- in terms of growth -- was still lagging behind its neighboring nations.

In its latest assessment on Indonesia's economy, the global investment bank was upbeat that, if Susilo fulfilled his campaign promises, the economy would benefit greatly from a revival of investment along with the return of investor confidence.

In order to boost investment, Indonesia needs either a pickup in foreign investment, a return of capitals that have fled the country or an upswing in domestic investment, the bank said in a statement sent to The Jakarta Post.

"Given the stable political landscape, post-elections, coupled with the likely scenario that Mr. Susilo begins to deliver on the promises within the first 100 days of office, an increase in investment from all three fronts could materialize," it said, and would thus lift the prospect of growth.

The statement noted that Susilo's promises centered on three objectives: First, boosting the economy through professional economic management and by prioritizing poverty and unemployment reduction; second, enhancing domestic security and reducing Indonesia's geopolitical risk; and third, raising the fight against corruption.