S&P Report Seen as Recognition of Government Policy Credibility

Coordinating Minister for Economic Affairs Airlangga Hartarto has responded to S&P Global Ratings’ decision to maintain Indonesia’s sovereign credit rating at BBB for the long term and A-2 for the short term, with the outlook remaining stable. Airlangga stated that this affirmation reflects the international community’s confidence in the government’s policy direction. “The rating affirmation by S&P at BBB with a Stable outlook is recognition of the consistency and credibility of the government’s economic policies. Amid rising global uncertainty, Indonesia has been able to maintain growth at around 5%, uphold fiscal discipline with a deficit below 3% of GDP, and strengthen governance in the natural resources sector. This is a positive signal for investors that Indonesia’s economic fundamentals remain solid,” said Coordinating Minister Airlangga, as quoted on Monday (13/7/2026). S&P projects the Indonesian economy will grow by around 5% per year over the next two to three years, with real growth forecast at 5.1% in 2026 and an average of 4.9% for the 2026-2029 period. The 5.6% year-on-year growth achieved in the first quarter of 2026 served as a positive catalyst, driven by government spending and accelerated budget disbursement. Indonesia’s GDP per capita is estimated to be around US$5,200 in 2026. One of the main anchors of the Stable outlook is the government’s commitment to maintaining the budget deficit ceiling below 3% of GDP, as mandated by law. S&P views the track record of compliance across administrations with this deficit ceiling as an important support for Indonesia’s creditworthiness. State revenue performance was also noted positively, with revenue growth of 19% in the first five months of 2026 compared to the same period the previous year. This improvement was driven by the recovery of tax administration, an increase in VAT receipts, and stronger royalty and dividend revenues from the natural resources sector. S&P specifically highlighted the government’s steps to strengthen centralised management and reduce leakages in the natural resources and minerals sector, which is considered to have the potential to increase state revenue as well as export foreign exchange earnings. The establishment of PT Danantara Sumberdaya Indonesia is viewed as an instrument that could change the landscape of the commodities sector, among other things by curbing practices of mis-invoicing and transfer pricing. Together with the strengthening of the Natural Resources Export Proceeds (DHE SDA) policy, these measures are expected to strengthen Indonesia’s external position sustainably. S&P assesses that Bank Indonesia has operational independence and has successfully kept inflationary pressures under control since the 2010s. The monetary policy mix and exchange rate flexibility are considered to provide adequate room for adjustment in the face of external pressures. Regarding the financial system, S&P views the government’s contingent risks as relatively limited, with banking sector assets at under 60% of GDP and the banking sector’s country risk at a manageable level. S&P stated that Indonesia’s rating has the potential to be upgraded if there is a structural strengthening of fiscal and external metrics, such as narrowing the budget deficit closer to 2% of GDP, sustainably increasing state revenue, lowering financing costs, and maintaining exchange rate stability. Airlangga emphasised that the government will continue to strengthen the quality and predictability of policy implementation to maintain market confidence. “The government is committed to maintaining macroeconomic stability while driving economic transformation through downstreaming, strengthening governance of export proceeds, and increasing productivity. Policy consistency and predictability will be key to pushing Indonesia’s rating to a higher level,” he concluded.