S&P Global Ratings raised its sovereign credit rating for Indonesia by one level to “BBB,” citing the Southeast Asian nation’s “strong growth prospects” and prudent fiscal policy. The rupiah, stocks and bonds rallied.
The rating was increased from “BBB-” and put on a stable outlook, S&P said in a statement.
The long-term rating might be raised again if Indonesia’s external settings improve materially from their current levels or if its fiscal settings improve over the next two years, it said.
Photo: AP
“We raised the ratings to reflect Indonesia’s strong economic growth prospects and supportive policy dynamics, which we expect to remain following the re-election of [Indonesian] President Joko Widodo recently,” S&P said. “The sovereign ratings on Indonesia continue to be supported by the government’s relatively low debt and its moderate fiscal performance.”
The rating upgrade will be a shot in the arm for Widodo who has pledged to bolster growth and expand an ambitious infrastructure drive that is estimated to cost more than US$400 billion in his second term.
The rating puts Indonesia at the same level as Hungary and Uruguay, but a notch below the Philippines, which won an upgrade from S&P last month.
“The upgrade validates our view that Indonesia’s fundamentals are sound and reform prospects remain good after the elections,” said Euben Paracuelles, an economist at Nomura Holdings Inc in Singapore. “The only element of surprise here was that S&P had a ‘stable’ outlook and hence they skipped changing to ‘positive’ outlook first before upgrading, so arguably this is an earlier-than-expected upgrade.”
Investors cheered the upgrade with the rupiah jumping as much as 1.1 percent against the US dollar, set for the biggest gain since Jan. 31. The yield on benchmark 10-year government bonds fell 5 basis points to 7.995 percent. The benchmark stock index was 0.9 percent higher when it closed for the midday break before the S&P announcement.
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