TEMPO.CO, Jakarta - President Joko Widodo has appreciated ratings agency Standard and Poor’s (S&P) for raising Indonesia credit rating last weekend. He said that the upgrade is a proof that Indonesia’s economy has gained more trust which will boost investment. "It shows that our financial management is getting better, ease of doing business has improved as well," Jokowi said before departing for Saudi Arabia last weekend.
S&P on Friday raised Indonesia to investment grade status BBB- or stable outlook. According to S&P, the upgrade was based on reduced fiscal risks in line with a more realistic budgeting policy. Earlier, Indonesia’s status was BB+ with positive outlook.
According to S&P, the government budget could limit possible deterioration in fiscal deficit and reduce the risk of increased debt to gross domestic product (GDP) ratio. S&P also foresees improved state revenue as a result of the tax amnesty program and more controlled fiscal expenditure. As such, S&P projects 5.3 percent economic growth with 4.7 percent inflation this year. Revenue is also expected to increase by 14 percent and debt to GDP ratio could reach 28,2 percent.
Jokowi said more investment would create new jobs. He said that it has resulted in declining government debt, allowing more fiscal space. Jokowi also sees that the upgrade in credit rating reflects improving political and security situations in Indonesia. "People are getting more mature in politics," he said.
Finance Minister Sri Mulyani Indrawati is confident that the investment grade rating has helped attract buyers of government bonds (SUN). She said that three prominent global ratings agencies have put Indonesia in lower medium grade. "We expect more interest shown in government bonds. It will have a positive impact on the yields," she said Friday at Tax DG headquarters in Jakarta.
Director General of Management, Financing and Risk of the Finance Ministry, Robert Pakpahan, said S&P rating upgrade will compensate for negative sentiments from Fed Fund Rate hike.
ADITYA BUDIMAN | ANGELINA ANJAR SAWITRI | KHAIRUL ANAM
