Fitch affirms Indonesia’s credit rating with stable outlook

25-Nov-2021 Intellasia | AntaraNews | 7:19 AM Print This Post

Credit rating agency Fitch affirmed Indonesia’s sovereign credit rating at BBB (investment grade) with a stable outlook on November 22, 2021, Bank Indonesia (BI) reported.

“The affirmation of Indonesia’s rating at BBB with stable outlook reflects recognition from Fitch, as one of the world’s leading credit rating agencies, over the macroeconomic stability and financial system of Indonesia that remain manageable,” BI Governor Perry Warjiyo said in a written statement released on Tuesday.

In addition, it also indicates strong prospects for the domestic economy in the medium term amid uneven global economic recovery and uncertainty about the global financial market, he added.

The strong prospects for the domestic economy are inseparable from credible policy and synergy between the central bank and the government in the policy mix, he said.

Looking ahead, the central bank will keep observing global and domestic economic developments, take the necessary steps to ensure macroeconomic stability and financial system, and synergise with the government to expedite national economic recovery, Warjiyo said.

Fitch’s affirmation of Indonesia’s credit rating is based on good prospects for the nation’s economic growth in the medium term and the low ratio of the government’s debts to the national gross domestic product (GDP), he informed.

However, Fitch has highlighted several challenges that may cast a shadow on the nation’s economic prospects, including high dependence on external financing, low government revenues, and several structural features, such as per capita GDP and governance indicators lagging behind other countries that have the same rating, he pointed out.

With a decline in COVID-19 cases after a spike in June-August 2021, Fitch has seen potential for the Indonesian economy to grow higher than the previous forecast of 3.2 percent given the improving mobility of the public and the high prices of export commodities, he said.

Fitch has forecast the Indonesian economy will expand by 6.8 percent in 2022 and continue to grow by 6 percent in the succeeding years due to the positive impact of the Job Creation Law on rising investment, he added.

On the fiscal side, Fitch has expressed the hope that the implementation of harmonised tax laws will help the government in returning the fiscal deficit to below 3 percent of the GDP in 2023, he noted.

Thus, the fiscal deficit is projected to reach 5.4 percent in 2021 and decline further to 4.5 percent in 2022, lower than the government-set target of 5.8 percent in 2021 and 4.9 percent in 2022, he added.


Category: Indonesia

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