Fitch Ratings (Fitch) affirmed Sovereign Credit Rating of the Republic of Indonesia at BBB/stable outlook.
The key factors that support the decision are a low government debt burden and a favourable GDP growth outlook amidst external challenges, including a strong dependence on external sources of financing, and several structural indicators that remain below rating peers, BI communications executive director Agusman said in a statement.
Bank Indonesia's decision to hike its policy rate and intervene in the foreign exchange market as a response to external pressures on emerging markets indicates a strong resolve to ensure stability.
In this regard, the authorities focus on macroeconomic stability was a key driver for Fitch?s upgrade of Indonesia's sovereign credit rating in December 2017.
In particular, Indonesia's external finances are stronger than during the 2013 Taper Tantrum, resulting from a disciplined monetary policy stance and macro-prudential measures that have helped curb a sharp rise in corporate external debt.
From the government side, the fiscal consolidation will improve the public debt dynamics.
Furthermore, Fitch does not expect the authorities to change their focus on stability and no indications of major changes in economic policies in the run-up to the presidential elections scheduled on 17 April 2019.
Fitch also acknowledged that Indonesia's GDP growth and general-government debt burden continue to compare favourably with peers. Indonesia's real GDP growth is projected to rise marginally to 5,2 percent in 2019 and 5,3 percent in 2020, supported by the continued public infrastructure spending push.
In addition, the ratio of Indonesia's general government debt to GDP already compares favourably with peers.
The sovereign's exposure to banking-sector risks is limited with banking sector's capital adequacy ratio remains strong.
Direct foreign-currency assets and liabilities are also generally well-matched or hedged. Furthermore, some of those liabilities are related to funding from banks foreign parents.
Source: NAM NEWS NETWORK
