Indonesia's economy has indeed improved since S&P's last assessment to the country, according to economists. (ID Photo/David Gita Roza)

Govt Questions S&P's Decision to Keep Indonesia's Rating Unchanged

BY :TABITA DIELA

JUNE 02, 2016

Jakarta. The government is baffled by S&P Global Ratings' decision to keep Indonesia's sovereign debt rating at one level below investment grade, a minister said on Thursday (02/05).

"Honestly, we question [the decision] because most of S&P's reasons are identical to the previous ones," Finance Minister Bambang Brodjonegoro told reporters.

Bambang, without mentioning specifics, said there are other countries with an investment grade despite having worse debt-to-gross domestic products ratio and larger deficits than Indonesia.

S&P Global Ratings increased Indonesia's rating outlook from stable to positive on May 21 last year, raising hopes that the rating agency will soon increase its sovereign debt rating which will allow the country to attract long-term investment funds to help finance the state budget and trade deficit.

Bambang, however, said Indonesia's unchanged rating also means that Indonesia has stood out among other emerging countries whose ratings are downgraded by the agency amid uncertainty in the global economy.

Indonesia's economy has indeed improved since S&P's last assessment to the country, according to economists.

Bank Indonesia Governor Agus Martowardojo said separately in a statement that both the central bank and the government have released a series of policy packages to stimulate the economy and ensuring a sustainable growth in the country.

"So far, Indonesia booked a better economic growth compared to other peer group countries," Agus said in the statement.

Anton Hendranata and Wisnu Wardana, Bank Danamon Indonesia economists, said the current macro situation has already stabilized and warranting for sustainable growth.

"Regulators have been on track to revive domestic demand through various monetary easing and fiscal expansion, providing leeway for long-run stability," both economists said in a note.

Still, Anton and Wisnu noted that investment grade for Indonesia from S&P "looks unlikely in the near future" if the agency is consistent with their review.

S&P said in its review that it Indonesia debt rating within the next 12-months period institutional settings if government could improve state revenue and spending quality while maintaining deficits at a sustainable level.

The government now expect the deficit to swell to Rp 313.3 trillion ($22.9 billion), or 2.48 percent of the country's gross domestic product, in 2016 revised state budget draft, as it expecting lower tax revenue. That compared to Rp 273 trillion, or 2.15 of GDP in the original budget.

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