S&P bullish on Indonesia

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S&P Bullish On Indonesia

Indonesia won a sovereign rating upgrade from S&P Global Ratings for its “strong economic growth prospects” and prudent fiscal policy, brightened by the re-election of President Joko Widodo. The nation’s currency, stocks and bonds rallied.

The rating was increased to BBB from BBB- and put on a stable outlook, S&P said in a statement on May 31. The long-term rating may be raised again if Indonesia’s external settings improve materially from their current levels, or if its fiscal settings improve over the next two years, it said.

“We raised the ratings to reflect Indonesia’s strong economic growth prospects and supportive policy dynamics, which we expect to stay following the re-election of President Joko Widodo recently,” S&P noted, adding that “the sovereign ratings on Indonesia continue to be supported by the government’s relatively low debt and its moderate fiscal performance.”

The rating upgrade will be a boost for Widodo who’s pledged to bolster growth and expand an ambitious infrastructure drive that’s estimated to cost more than $400 billion in his second term. It puts Indonesia at the same level as Hungary and Uruguay, but a notch below the Philippines, which won an upgrade from S&P last month.

Investors cheered the surprise rating upgrade with the rupiah jumping as much as 1.1 per cent against the US dollar and set its biggest gain since January 31. While the yield on benchmark ten-year government bonds fell nine basis points to 7.96 per cent, the benchmark stock index surged as much as 1.5 per cent to the highest level since May 13.

Indonesia won investment grade rating from all the top rating companies for the first time in two decades in Jokowi’s first term as his government reined in the country’s fiscal deficit and accelerated efforts to increase its tax-to-GDP ratio even as it raised government spending to a record to support growth.

Southeast Asia’s largest economy has been growing at about five per cent despite significant headwinds, including last year’s emerging market rout. The government is estimating growth next year of 5.3 to 5.6 per cent even amid a deepening trade war between the US and China and as global demand wanes.

“The Indonesian economy is growing faster than global peers at a similar level of income. This reflects the government’s policy-making has been effective in promoting sustainable public finances and balanced economic growth,” S&P said.

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Indonesia won a sovereign rating upgrade from S&P Global Ratings for its “strong economic growth prospects” and prudent fiscal policy, brightened by the re-election of President Joko Widodo. The nation’s currency, stocks and bonds rallied. The rating was increased to BBB from BBB- and put on a stable outlook, S&P said in a statement on May 31. The long-term rating may be raised again if Indonesia’s external settings improve materially from their current levels, or if its fiscal settings improve over the next two years, it said. “We raised the ratings to reflect Indonesia’s strong economic growth prospects and supportive...

Reading Time: 2 minutes

S&P Bullish On Indonesia

Indonesia won a sovereign rating upgrade from S&P Global Ratings for its “strong economic growth prospects” and prudent fiscal policy, brightened by the re-election of President Joko Widodo. The nation’s currency, stocks and bonds rallied.

The rating was increased to BBB from BBB- and put on a stable outlook, S&P said in a statement on May 31. The long-term rating may be raised again if Indonesia’s external settings improve materially from their current levels, or if its fiscal settings improve over the next two years, it said.

“We raised the ratings to reflect Indonesia’s strong economic growth prospects and supportive policy dynamics, which we expect to stay following the re-election of President Joko Widodo recently,” S&P noted, adding that “the sovereign ratings on Indonesia continue to be supported by the government’s relatively low debt and its moderate fiscal performance.”

The rating upgrade will be a boost for Widodo who’s pledged to bolster growth and expand an ambitious infrastructure drive that’s estimated to cost more than $400 billion in his second term. It puts Indonesia at the same level as Hungary and Uruguay, but a notch below the Philippines, which won an upgrade from S&P last month.

Investors cheered the surprise rating upgrade with the rupiah jumping as much as 1.1 per cent against the US dollar and set its biggest gain since January 31. While the yield on benchmark ten-year government bonds fell nine basis points to 7.96 per cent, the benchmark stock index surged as much as 1.5 per cent to the highest level since May 13.

Indonesia won investment grade rating from all the top rating companies for the first time in two decades in Jokowi’s first term as his government reined in the country’s fiscal deficit and accelerated efforts to increase its tax-to-GDP ratio even as it raised government spending to a record to support growth.

Southeast Asia’s largest economy has been growing at about five per cent despite significant headwinds, including last year’s emerging market rout. The government is estimating growth next year of 5.3 to 5.6 per cent even amid a deepening trade war between the US and China and as global demand wanes.

“The Indonesian economy is growing faster than global peers at a similar level of income. This reflects the government’s policy-making has been effective in promoting sustainable public finances and balanced economic growth,” S&P said.

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