Fitch Lifts Indonesia's Credit Ratings

Fitch Indinasia 122117

Fitch Ratings on Thursday lifted the sovereign ratings of Indonesia citing its resilience to external shocks.

The rating was upgraded to 'BBB', from 'BBB-', with stable outlook. This was the second lowest investment grade.

In May, S&P Global Ratings had raised the nation out of junk status, saying effective expenditure and revenue measures made public finances stronger.

According to Fitch, Indonesia's resilience to external shocks steadily strengthened over the past few years, as macroeconomic policies consistently geared towards maintaining stability.

The flexible exchange-rate policy helped Southeast Asia's largest economy to increase foreign reserve buffers to $126 billion at the end of November 2017, reaching seven months of current account payments, compared with the 'BBB' median of just six months.

Moreover, monetary policy has been sufficiently disciplined to limit bouts of volatile capital outflows during challenging periods. Further, macro-prudential measures helped to control a sharp rise in corporate external debt, Fitch said.

However, the agency cautioned that external challenges remain, including potential emerging market pressure in the context of the US Federal Reserve's policy normalization.

As the economy benefits from the global pick-up in trade and stabilizing commodity prices, Fitch forecast GDP growth to rise to 5.4 percent in 2018 and 5.5 percent in 2019, from 5.1 percent in 2017.

A low general-government debt burden of 28.5 percent of GDP in 2017, as forecast by Fitch, compares well with the 'BBB' median of 41.1 percent. The government is adhering to a self-imposed budget-deficit ceiling of 3 percent of GDP, the agency noted.

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