Standard and Poor's gives positive outlook on RI ratings
Standard and Poor's gives positive outlook on RI ratings
Dadan Wijaksana and Fabiola Desy Unidjaja, Jakarta
Global rating agency Standard and Poor's (S&P) may upgrade
Indonesia's sovereign credit ratings in the near future after it
revised on Wednesday the outlook of the ratings to positive from
stable.
But S&P said that the rating upgrade would depend on the
performance of the next government in implementing key economic
reform programs.
"Looking ahead, the country's credit ratings could improve if
the new government demonstrates its resolve for the continued and
timely implementation of reforms," S&P credit analyst Agost
Benard said in a press statement.
Indonesia's foreign currency rating of B is well below the
credit rating of other neighboring countries like Thailand,
Singapore and Malaysia.
An upgrade in the credit ratings would help improve investor
confidence in the country, which badly needs new investments to
bolster economic growth.
Some analysts expected S&P to upgrade the country's ratings
one notch to B+ by the end of the year. The rating upgrade
normally follows a upward revision in the rating outlook.
But such a rating is still below the investment grade rating
of BBB, achieved by the country before the 1997-1998 financial
crisis.
S&P said the outlook revision reflected continuing progress in
the country's several key macroeconomic indicators, particularly
a stable exchange rate, falling inflation and lower interest
rates.
"Further progress in these areas could help reduce the
vulnerability of the government's fiscal position," Benard said.
Not only has the government managed to gradually reduce its
budget deficit and public debt-to-GDP ratio, it has also managed
to improve its external liquidity.
By the end of the year, Indonesia's foreign exchange reserves
should reach some US$35 billion -- sufficient to cover the
payments of around six months of imports, S&P said.
The news from S&P has help improved sentiment in the local
stock market and the rupiah, which earlier this week had been
under strong pressure amid political uncertainty at home ahead of
the July presidential election and a possible hike in the U.S.
Federal Reserve's interest rate.
The rupiah closed higher at Rp 8,940 per U.S. dollar on
Wednesday from Rp 9,000 the previous day, while the Jakarta Stock
Composite Index jumped by 3.6 percent to 744.291.
Elsewhere, despite the progress in the Indonesian economy,
some negative issues were also noted by S&P.
At the moment, the country's economic growth was still below
its potential and relatively lagging behind its regional peers,
it said, referring to Indonesia's modest rate of growth in the
past three years, largely because of investment woes.
For this year, the government expects the economy to expand by
4.8 percent.
Benard said that the potential to grow faster would be based
on continued broad-range of reform, "particularly in the
judicial, legal and labor sector," to boost the investment
climate.
Dadan Wijaksana and Fabiola Desy Unidjaja, Jakarta
Global rating agency Standard and Poor's (S&P) may upgrade
Indonesia's sovereign credit ratings in the near future after it
revised on Wednesday the outlook of the ratings to positive from
stable.
But S&P said that the rating upgrade would depend on the
performance of the next government in implementing key economic
reform programs.
"Looking ahead, the country's credit ratings could improve if
the new government demonstrates its resolve for the continued and
timely implementation of reforms," S&P credit analyst Agost
Benard said in a press statement.
Indonesia's foreign currency rating of B is well below the
credit rating of other neighboring countries like Thailand,
Singapore and Malaysia.
An upgrade in the credit ratings would help improve investor
confidence in the country, which badly needs new investments to
bolster economic growth.
Some analysts expected S&P to upgrade the country's ratings
one notch to B+ by the end of the year. The rating upgrade
normally follows a upward revision in the rating outlook.
But such a rating is still below the investment grade rating
of BBB, achieved by the country before the 1997-1998 financial
crisis.
S&P said the outlook revision reflected continuing progress in
the country's several key macroeconomic indicators, particularly
a stable exchange rate, falling inflation and lower interest
rates.
"Further progress in these areas could help reduce the
vulnerability of the government's fiscal position," Benard said.
Not only has the government managed to gradually reduce its
budget deficit and public debt-to-GDP ratio, it has also managed
to improve its external liquidity.
By the end of the year, Indonesia's foreign exchange reserves
should reach some US$35 billion -- sufficient to cover the
payments of around six months of imports, S&P said.
The news from S&P has help improved sentiment in the local
stock market and the rupiah, which earlier this week had been
under strong pressure amid political uncertainty at home ahead of
the July presidential election and a possible hike in the U.S.
Federal Reserve's interest rate.
The rupiah closed higher at Rp 8,940 per U.S. dollar on
Wednesday from Rp 9,000 the previous day, while the Jakarta Stock
Composite Index jumped by 3.6 percent to 744.291.
Elsewhere, despite the progress in the Indonesian economy,
some negative issues were also noted by S&P.
At the moment, the country's economic growth was still below
its potential and relatively lagging behind its regional peers,
it said, referring to Indonesia's modest rate of growth in the
past three years, largely because of investment woes.
For this year, the government expects the economy to expand by
4.8 percent.
Benard said that the potential to grow faster would be based
on continued broad-range of reform, "particularly in the
judicial, legal and labor sector," to boost the investment
climate.