The Jakarta Post's front-page report stated that Indonesia has maintained its original sovereign credit rating in Standard & Poor's Global Ratings report, avoiding a downgrade and providing a much-needed breathing space for the Indonesian market and fiscal credibility, which have been struggling for months.

Standard & Poor's Global Ratings released its report on Monday (July 13), maintaining Indonesia's sovereign credit rating at BBB, with the outlook also unchanged at "stable." BBB is the second-to-last investment-grade rating.

The report noted that S&P expects Indonesia's government fiscal revenues to continue recovering this year, while export earnings are also expected to rebound as commodity prices rise.

The report said: "Policies aimed at enhancing revenue from resource sectors and export income should generate further gains; if policy adjustments become more predictable and are effectively implemented, the impact will be even more pronounced."

Additionally, S&P believes that keeping the budget deficit within the statutory ceiling of 3% of gross domestic product (GDP) remains a key policy priority for the Indonesian government.

The report emphasized: "The fiscal discipline maintained by past Indonesian governments forms the foundation of Indonesia's credit rating."

High energy prices, a high-interest-rate environment, currency depreciation, policy uncertainty, and accumulating debt have worsened Indonesia's current fiscal and external conditions. However, the report considers this situation temporary and expects it to ease due to rising commodity prices and government spending cuts.

This year, Indonesia's sovereign credit rating has drawn red flags from multiple institutions. In the first half of the year, international rating agencies such as Moody's and Fitch expressed concerns over President Prabowo’s governance capacity, downgrading Indonesia's credit outlook to negative.

In January, the internationally recognized index provider MSCI issued a warning about transparency in Indonesia's stock market, stating that opaque shareholding structures pose a "fundamental issue" regarding investment suitability. MSCI recently postponed its decision on Indonesia's market rating again, delaying the announcement until November.

Consecutive adverse ratings have shaken investor confidence in Indonesia's stock market, leading to capital outflows. Indonesia's ability to maintain its rating in the S&P report thus injected a much-needed boost into the market.

Indonesia's stock market closed up 1.9% on Monday. The foreign exchange market had already closed when the report was released.

The Bank of Indonesia responded to the latest rating by saying that S&P's decision reflects global investors' confidence in Indonesia's economic management.

Deputy Governor Destriyanti told Reuters that with growing investor confidence, the Indonesian rupiah could see further appreciation. The rupiah has recently been hovering around the historical level of IDR 18,000 per US dollar.

Wijayanto Samirin, senior economist at Universitas Pancasila Jakarta, told media outlets that most analysts had originally predicted S&P would downgrade Indonesia's outlook to negative, so the fact that Indonesia managed to maintain its rating is positive news. However, he also pointed out that the report explicitly highlighted concerns about Indonesia's fiscal sustainability and robustness.

"While the rating news did drive a rally in Indonesia's stock market, the impact is expected to be limited," Wijayanto said. "Some recent negative news involving high-ranking officials involved in corruption has offset the positive effects of the good news."

Wasisto Raharjo Jati, a political researcher at the National Research and Innovation Agency of Indonesia, remains skeptical about the positive impact of maintaining the rating. He said the rupiah remains weak and the government has not adjusted its fiscal policy—factors insufficient to restore investor confidence. Investors continue to harbor distrust toward Indonesia's economic situation.

Original article: toutiao.com/article/1870824994678784/

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