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Moody’s Upgrades Indonesia

Indonesia’s resilience and capacity to respond to shocks has improved.Indonesia’s resilience and capacity to respond to shocks has improved.

Indonesia won a credit rating upgrade from Moody’s on Friday, with the agency lauding central bank and government policies for boosting confidence in Southeast Asia’s biggest economy.

 The upgrade—after similar moves by other ratings agencies—comes at a good time for Indonesia’s president Joko Widodo. Boosting growth is at the center of what could be a tough re-election bid in next year’s presidential ballot, AFP reported.

Indonesia’s efforts at keeping budget deficits and inflation under control were behind Moody’s boosting its rating to Baa2 from Baa3, and bumping its outlook to stable, it said. A better credit rating tends to lower a country’s borrowing costs and can make it more attractive to investors.

“Together with a build-up of financial buffers, prudent fiscal and monetary policy strengthens Moody’s confidence that Indonesia’s resilience and capacity to respond to shocks has improved,” the ratings agency said.

Fitch echoed that sentiment in December when it also boosted Indonesia’s sovereign rating, saying economic reforms meant the country could better weather external shocks. That came after Standard & Poor’s raised Indonesia’s credit rating from junk status to investment grade.

The government’s adherence to its legally mandated budget deficit cap at 3% of gross domestic product and the central bank’s track record of prioritizing macroeconomic stability over promoting short-term growth are among the rating drivers, Moody’s said.

The government plans to narrow the fiscal deficit to below 2% of GDP next year from the 2.19% targeted in the 2018 budget.

 

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