Indonesia Raised to Investment Grade by S&P

S&P raised Indonesia’s sovereign credit rating to investment grade on Friday, in line with the other two major rating agencies, in a move likely to attract more investment into Southeast Asia’s top economy.
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Jakarta, 23 Sha’ban 1438/20 May 2017 (MINA) – S&P Global Ratings raised Indonesia’s credit rating to investment grade, bringing it in line with the other two main rating companies and paving the way for more fund inflows into Southeast Asia’s largest economy. Stocks surged to a record and the rupiah advanced.

The sovereign rating was lifted to BBB- from BB+ with a stable outlook, S&P said, citing an improvement in the budget. Both Moody’s Investors Service and Fitch Ratings have a positive outlook on their assessments of the nation’s debt, MINA reported, citing Bloomberg.

“The government’s new focus on realistic budgeting has lowered the risks that budget deficits will widen significantly when government revenue disappoints,” S&P said. The upgrade reflects “our assessment of reduced risks to Indonesia’s fiscal metrics,” it said.

The S&P upgrade comes on the back of a successful tax amnesty that earned the government more than $11 billion in revenue, helping to ease pressure on the budget and pay for much-needed infrastructure projects. The economy is also being buoyed by a rebound in exports and strong consumer spending.

As Asia’s last major economy without a full-investment grade, the higher rating boosts the appeal of the nation’s assets. Goldman Sachs Group Inc. said in March an upgrade may help attract as much as $5 billion in funds.

The Jakarta Composite Index jumped as much as 3.2 percent to a record 5,825.2, extending gains this year to almost 10 percent. The rupiah rose as much as 0.3 percent, paring losses of as much as 0.5 percent earlier and taking gains this year to 1 percent.

“This is a well-deserved upgrade thanks to its prioritization of fiscal sustainability at the expense of growth in 2016,” Trinh Nguyen, senior economist for emerging Asia at Natixis SA in Hong Kong, wrote in a note.

Among the benefits of the upgrade include access to a pool of eligible foreign investors that only invest in at least investment-grade rated assets, lowering funding costs, she said. (T/RS5/RS1)

Mi’raj Islamic News Agency (MINA)