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Financial News: S&P Upgrades Indonesia Rating To 'BBB'

S&P Upgrades Indonesia Rating To 'BBB'

05/31/2019 - 07:53:00 (RTTNews)

(RTTNews) - S&P Global Ratings upgraded Indonesia's sovereign rating by a notch from the lowest investment grade level on Friday as the country is expected to have strong growth over the coming years underpinned by prudent fiscal policies.

The credit rating were lifted to 'BBB' from 'BBB-' with 'stable' outlook. The 'BBB-' was the lowest investment grade.

The 'stable' outlook indicates expectations that the economy will continue to perform strongly, enhancing the broader credit profile.

S&P observed that re-elected President Joko Widodo's supportive policy dynamics will underpin the government's relatively low debt and its moderate fiscal performance.

The Indonesia economy is expanding faster than global peers at a similar level of income. This suggests that the government's policy-making has been effective in promoting sustainable public finances and balanced economic growth.

According to S&P, Indonesia's political and policy institutions are generally stable and free of challenges to their legitimacy.

However, the agency noted that the key rating constraint is Indonesia's GDP per capita. The country's strong per capita trend growth of approximately 4.1 percent will help to alleviate this weakness over time, S&P added.

The economy is largely dependent on domestic demand, while net trade subtracted 1.1 percent from real GDP growth in 2018. The economy is expected to expand 5.2 percent each in 2019 and 2020.

Further, S&P projected the fiscal deficit to remain about 2.0 percent with the return of the Widodo government.

The rating agency forecast Indonesia's current account deficit to shrink in the next few years, reflecting steady global demand and a recovery in its terms of trade. Further, the rupiah's flexibility should provide some benefit to Indonesia's external metrics over the next three to five years.

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