Indonesia expects to receive triple-B credit rating in 2000

JAKARTA (JP): Indonesia expects to receive a high-triple-B credit rating from Salomon Brothers by the end of the decade for its economic reform and deregulation achievements, say analysts at the investment bank.

"Indonesia has an excellent record of economic reform and deregulation, sustainable financial stability and a steady growth outlook as reasons for the improving sovereign credit outlook," Asia-Pacific economist Andrew Freris said in a report published by Salomon Brothers in Hong Kong on Thursday.

According to the report The Republic of Indonesia: Consolidating its Gains, which was written by three Salomon Brothers analysts -- Julian Liau, Peter Plaut and Andrew Freris -- the investment bank is optimistic that Indonesia's policies will continue to show progress.

Prudent economic policies, the integration of the private sector, a diversification of its industrial base and an ability to maintain political and social stability were some of the rating considerations.

The analysts also predicted that the Gross Domestic Product in 1996 and 1997 will grow at 8 percent and 8.5 percent respectively, conditioned primarily by export growth.

But the analysts warned of credit concerns that Indonesia will continue to face, such as the issue of political succession, the country's relatively high external debt burdens, maintaining non- oil export growth, enhancing domestic competitiveness, continuing the deregulation process, the unequal distribution of income and meeting the country's substantial development needs.

Indonesia, the analysts noted, was last upgraded in April 1995 by Standard & Poor's from BBB- (with a positive outlook) to BBB (with a stable outlook).

The analysts expect Moody's to continue its conservative stance and maintain its low-triple-B rating in the near term, citing lingering concern with the issue of political change.(13)