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S&P Lifts Indonesia's Sovereign Ratings


Standard & Poor's on Friday lifted the sovereign ratings of Indonesia to investment grade citing authorities' effective expenditure and revenue measures to stabilize the public finances.

The country's sovereign ratings were raised to 'BBB-' from 'BB+', with stable outlook. The agency said the ratings reflect the assessment of reduced risks to Indonesia's fiscal metrics.

"Despite the broader vulnerabilities of the economy to external shocks, we consider strong public finances a cornerstone of our investment-grade rating on Indonesia," S&P said.

Thus, Indonesia is assigned investment grade by all three leading rating agencies.

Moody's Investors Service and Fitch Ratings had earlier rated Indonesia with 'BBB-'. S&P upgrade would help Southeast Asia's largest economy to attract more funds.

S&P said the government's new focus on realistic budgeting has lowered the risks that budget deficits will widen significantly when government revenue disappoints.

The fiscal deficit is forecast to remain below 2.5 percent of GDP over the next three to four years despite the government's intention to expand its infrastructure program.

Net general government debt is expected to stabilize near the current low levels. Moreover, S&P noted that economic and financial policy settings have become more predictable, recently.

The economy had expanded 5.01 percent in the first quarter, following December quarter's 4.9 percent growth.

The agency observed that the main weakness remains the economic risks facing the country, where the economy is still considered lower middle-income and, as a commodity exporter and capital importer, subject to external shocks. A key rating constraint is Indonesia's GDP per capita, S&P said.

The 'stable' outlook reflects the view that the policy environment and economic conditions will keep external and fiscal metrics close to current levels over the next one to two years.

by RTTNews Staff Writer

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