Moody’s Lifts Debt Rating for Indonesia


The nation’s sovereign debt ratings were raised to the highest level in 11 years by Moody’s Investors Service because the economy had avoided following its neighbors into recession.
Moody’s lifted Indonesia’s local and foreign-currency ratings one level to Ba2, the company said in a statement on Wednesday, citing the economy’s “resilience to the global recession.” That’s two levels below investment grade, putting Indonesia on par with Guatemala, Armenia and Jordan.
“Indonesia deserves to get upgraded because the economic and political situation has been stable,” said Destry Damayanti, an economist at PT Mandiri Sekuritas in Jakarta. “This upgrade will definitely send a positive impact to the financial market.”
Moody’s last raised Indonesia’s credit rating in 2007. The country’s foreign-currency debt is rated BB- by Standard and Poor’s, three levels below investment grade.
The upgrade is a “confirmation of sound monetary and fiscal policy measures combined with a strong banking system and measured real-sector growth,” said Branko Windoe, head of treasury at PT Bank Central Asia in Jakarta. “Given inflation, the cost of funds have room go lower and demand for Indonesia financial assets would continue to grow.”
Yudhoyono’s re-election will “ensure policy continuity and possibly lead to a deepening of policy and structural reforms,” Moody’s said. The nation’s improving economic management and its “appropriate policy stance” also highlight “the growing credibility and predictability of government policies,” said Aninda Mitra, the ratings company’s vice president and sovereign analyst for Indonesia.
Gains in services, construction and manufacturing helped Indonesia’s $514 billion economy resist the global recession and the threat of terrorist attacks such as those that killed nine people in Jakarta in July.
The World Bank on Monday raised its 2009 growth forecast for Indonesia’s GDP to 4.3 percent from 3.5 percent. The economy is Southeast Asia’s fastest growing and has fared better than neighbors including Thailand, Malaysia and Singapore, which slid into recession as exports collapsed amid the global slump.
Moody’s also raised the foreign currency long-term deposit ratings for 10 Indonesian banks to Ba3 from B1 on Wednesday. The outlook on the sovereign and bank deposit ratings is stable.
The ratings upgrades will improve the nation’s access to financing, Bank Indonesia Deputy Governor Hartadi Sarwono said in Jakarta on Wednesday.
“The cost of funds in Indonesia will decline because the premium risk will fall,” Rahmat Waluyanto, director general of the debt management office at the Finance Ministry, said in a text message.
“Investment is expected to increase in Indonesia and job opportunities are expected to improve. Economic growth is expected to accelerate.”
Source: The JakartaGlobe (16/09/2009)