Fitch Affirms Indonesia’s Sovereign Credit Rating at BBB/Stable Outlook - Bank Sentral Republik Indonesia
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May 25, 2019
No. 21/15/DKom
Fitch Ratings (Fitch) has affirmed Indonesia’s Sovereign Credit Rating at BBB/stable outlook (Investment Grade), as announced on 14 March 2019. In response to the statement, Governor of Bank Indonesia, Perry Warjiyo stated that “Fitch’s affirmation on Indonesia’s rating at BBB/stable outlook reflects the confidence of rating agency on Indonesia’s economy and its external resilience amidst ongoing global economic uncertainties. Going forward, Bank Indonesia will consistently implement policy mix to strengthen external stability and boost economic growth momentum. In this regard, coordination with the Government and other relevant authorities will be strengthened.”
The key factors that support the decision are a favourable GDP growth outlook and a small government debt burden with external challenges including a strong dependence on external sources of financing, low government revenue, and several structural indicators that remain below those of rating peers.
Indonesia’s GDP growth outlook continues to be strong relative to its peers. Domestic demand is expected to remain resilient while exports are likely to remain subdued in an environment of slowing global demand. Consumption and investment continue to underpin growth benefitting from a civil servant salary bonus, rise in the social assistance bill, and implementation of large infrastructure projects by state-owned enterprises (SOEs).
From external side, Indonesia’s sovereign credit fundamentals should be resilient to substantial exchange rate volatility if bouts of market turmoil renewed should the US Fed resume tightening monetary policy later in the year. Indonesia’s low government debt burden compared with its peers would provide a cushion, while large banks are also resilient to significant stress.
Fitch expects headline inflation to average 3.4% in 2019 and policy rates to remain stable. This would be in line with Bank Indonesia’s aim to strengthen external stability by controlling the current account deficit and to maintain the attractiveness of Indonesian financial assets. Bank Indonesia is more likely to ease macro-prudential measures in the meantime.
From fiscal side, fiscal deficit reduction in a year before elections underscores Indonesia’s generally conservative approach to fiscal policy. The fiscal deficit narrowed to 1.8% of GDP in 2018 from 2.3% in 2017, in large part due to strong revenue growth as well as efforts to improve tax collection.
Furthermore, banking-sector related risks to the sovereign are considered limited, given a strong capital-adequacy ratio, at 22.9% in December 2018. Direct foreign-currency assets and liabilities of banks are generally well-matched or hedged and some liabilities relate to funding from banks' foreign parents.
Fitch had previously affirmed Indonesia Sovereign Credit Rating at BBB/stable outlook (Investment Grade) on September 2, 2018.
Jakarta, 14th March 2019
Communication Department
Onny Widjanarko
Executive Director  


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