Rating and Investment Information, Inc. (R&I) affirms Indonesia's Sovereign Credit Rating at BBB+/stable outlook (investment grade) as announced on 22 April 2021.

In response to the decision, Governor of Bank Indonesia, Perry Warjiyo, stated that “The rating affirmation shows confidence of international stakeholder on the Indonesia's maintained macroeconomic stability and economic prospects in the medium-term amid the COVID-19 pandemic. This supported by the credibility of the policies and strong coordination of policy mix between Bank Indonesia and the Government. Going forward, Bank Indonesia will continue to closely monitor global and domestic economic developments, take the necessary policy measures to ensure macroeconomic and financial system stability and continue to strengthen the synergy with the Government to accelerate the national economic recovery."

R&I assessed there are three key factors that support the decision. First, Indonesia's economy will likely return to a pre-coronavirus growth level in one to two years. The government's structural reform efforts are expected to boost growth potential in the medium to long term. Second, the government debt ratio remains relatively low despite the pressure on the fiscal side. The disciplined fiscal policy stance to date will lead to an improvement of the fiscal balance in the coming years. Third, the economic resilience to external shocks is maintained, supported by policy responses taken by the government and the central bank and ample foreign reserves.

Real gross domestic product (GDP) contracted by 2.1% in 2020. For 2021, Bank Indonesia projects growth at 4.1%-5.1%. To bolster economic growth, the government continues its reform efforts. In November 2020, the Government has passed omnibus law on Job Creation to promote investments and job creation. In an effort to attract foreign investment in project financing, especially infrastructure project, the government has established sovereign wealth fund while intensively allocating a budget to infrastructure development. Supported by these policies, R&I expected that the Indonesia's economy to show medium-term growth around 5%.

On the external front, the current account deficit for 2020 narrowed to 0.4% of GDP, reflecting a decrease in domestic demand and lower oil prices. In the next few years, the current account deficit is projected around 1-2% of GDP, as rebound in domestic demand will push up imports. Foreign reserves were US$137.1 billion as of end-March 2021, covering about 10 months of imports and servicing of government external debt repayment, which ensure adequate foreign currency liquidity.

On the fiscal side, in 2020, the government temporarily eased the rule of containing fiscal deficits at 3% of GDP in response to the coronavirus pandemic. Fiscal spending under a national economic recovery (PEN) program widened the 2020 fiscal deficit to 6.1% of GDP. In 2021, fiscal deficit is expected at 5.7% of GDP in line with expansionary fiscal policy that focused on supporting the economic recovery. The government intends to narrow the fiscal deficit to 3% of GDP or lower in 2023. Outstanding government debt rose to 39.4% of GDP as of end-2020. This is still a low level relative to the rating, and a debt-servicing burden is curtailed.