Jakarta. Moody's Investors Services on Friday (13/04) upgraded Indonesia's sovereign credit ratings a notch above its lowest investment grade, citing effective policies to support broad economic stability.
Moody's said it now rates debts of Southeast Asia's largest economy at Baa2, up from the previous Baa3 with a stable outlook.
The move followed Fitch Ratings' upgrade in January to also one notch above the lowest investment grade. Indonesia's debts are now rated the same by the two rating agencies, while S&P still rates Indonesia at the bottom of its investment grade scale.
The Moody's decision bolsters President Joko "Jokowi" Widodo's ambitious multi-billion dollar effort to spruce up Indonesia creaking infrastructure — part of a broader goal to foster faster economic growth.
The nation could count on foreign investors to provide some of the financing, given a ratings upgrade generally means more capital inflows for a country as its default risk is considered lower.
"Together with a build-up of financial buffers, prudent fiscal and monetary policy strengthens Moody's confidence that the sovereign's resilience and capacity to respond to shocks has improved," the ratings agency said in a statement.
Moody's said Indonesia has maintained strict adherence to its fiscal deficit legal limit and that government debt has been low. It forecast the government's debt to hover around 30 percent of GDP in the next few years, below the median of 39 percent for all investment grade sovereigns.
It also praised the central bank for getting inflation inside its target range for three years in a row and noted that the country's foreign exchange reserves were adequate.
The reserves were at record high of $132 billion at the end of January, but has since declined partly due to Bank Indonesia's intervention to stabilise the rupiah currency.
However, Moody's said its stable outlook "incorporates downside risks from political challenges to the implementation of further broad economic, fiscal and regulatory reforms."
It said delays or reversals in reforms could happen, especially ahead of next year's elections.