JCR Revises Indonesia's Credit Outlook to Positive
Jakarta. Japan Credit Rating Agency (JCR) upgraded Indonesia's credit outlook to positive on Tuesday (07/03) thanks to a more favorable economic outlook and strong fiscal and monetary management.
The Tokyo-based rating agency has maintained Indonesia's credit rating of BBB-, the lowest rank of investment grade, but gave it a positive outlook which indicates the possibility of an upgrade in JCR's next assessment.
There is no regular schedule for the JCR assessment, with the previous one being released in February last year.
"The ratings mainly reflect Indonesia’s solid economic growth," a statement by JCR said.
JCR pointed to Indonesia's fast-growing economy last year, which was bolstered by "buoyant" consumer spending in a country of 258 million people — the fourth most populous in the world.
The Indonesian government is targeting a 5.1 percent economic growth this year, as stated in the 2017 state budget, up from 5 percent last year.
The JCR report noted that Indonesia's current account deficit narrowed to 1.8 percent of gross domestic products last year, down from 2 percent a year earlier due to improving exports, reducing the country's dependency on offshore financing.
Bank Indonesia, the central bank, had been tightening rules on borrowing from foreign sources since 2014, an effort which managed to shrink foreign debt made by the private sector by 5.6 percent annually to $158.7 million at the end of 2016. That was the first fall since 2005.
"The Indonesian economy is expected to bottom out going forward now that resource prices have stopped falling," the statement said. "JCR holds that it is essential for the authorities to accelerate structural reforms to ensure long-term sustainable growth by capitalizing on that tailwind."
The rating agency will monitor the country's infrastructure development, foreign direct investment and private foreign debt.
Bank Indonesia Governor Agus Martowardojo welcomed JCR's outlook in a separate statement.
"The revision of the rating outlook is a result of the Indonesian government's continuous effort to promote economic growth while at the same time maintaining macroeconomic and financial system stability in spite of a dynamic global environment," he said.
Agus said JCR's outlook revision may improve investors' confidence in Indonesia which the central bank will try to reinforce by continuing to implement a consistent policy mix and improving its coordination with the government.
JCR is the second rating agency this year to upgrade its outlook on Indonesia. Moody's Investors Service also decided to upgrade its credit outlook on Indonesia to positive last month.
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