Fitch Upgrades Indonesia to BBB with Stable Outlook

Ade Hapsari Lestarini    •    21 Desember 2017 13:26 WIB
indonesian economy (en)
Fitch Upgrades Indonesia to BBB with Stable Outlook
Illustration (Photo: MI/Galih Pradipta)

Jakarta: International rating agency Fitch Ratings has upgraded Indonesia's Long Term Foreign and Local Currency Issuer Default Ratings by one level to BBB with a stable outlook.

"Indonesia's resilience to external shocks has steadily strengthened in the past few years, as macroeconomic policies have consistently been geared towards maintaining stability," said the rating agency in a press release on Thursday morning.

"A more flexible exchange-rate policy since mid-2013 has helped foreign reserve buffers swell to USD126 billion as at November 2017, reaching seven months of current account payments, compared with the 'BBB' median of six months," the press release added.

According to Fitch Ratings, the country has recorded a number of achievements. Monetary policy has been sufficiently disciplined to limit bouts of volatile capital outflows during challenging periods. Macro-prudential measures have helped curb a sharp rise in corporate external debt.

However, the country should be cautious with a wide range of challenges. Its dependence on commodities remains relatively high. Its net and gross external debt remain elevated compared with BBB peers.

"Domestically, the possibility that political noise becomes a distraction from economic policy-making in the run up to the 2018 local elections and 2019 presidential election represents a risk to the strong reform drive and could undermine domestic and foreign market sentiment," the press release explained.