Fitch Rating: Indonesia's Credit at BBB Outlook Stable

Top credit rating agency, Fitch Rating affirms Indonesia's credit rating at BBB outlook stable. The Ministry of Finance considered it as a very extraordinary achievement for Indonesia in the midst of a pandemic. 

Throughout 2020, the top 3 world rating agencies, namely S&P, Moody's and Fitch, have downgraded 53 countries for 124 times and revised the outlook to negative in 63 countries for 133 times.

"The rating agency's decision to affirm Indonesia's credt rating is an acknowledgment of Indonesia's macroeconomic stability and medium-term prospects that are maintained amidst the COVID-19 pandemic situation," said Head of the Communications and Information Services Bureau, Ministry of Finance, Rahayu Puspasari (23/11/2021). 

Ministry of Finance's main building. (Photo: Ministry of Finance)

Fitch assesses that Indonesia's economic activity is gradually recovering from the pressures of COVID-19. The recovery is supported with efficient policies in handling the pandemic and encouraged by efforts to accelerate vaccination.

The vaccination program has reached 49.37% of the population or equivalent to 133.40 million people for the first dose and 32.55% of the population or equivalent to 87.96 million people for the second dose.

The existence of bureaucratic reform in the fields of investment and taxation is also an assessment for Fitch. 

The Indonesian economy is expected to recover and grow by 3.2% in 2021 and 6.8% in 2022, supported by the implementation of the Job Creation Law, which aims to reduce investment barriers that contribute to growth. 

Furthermore, the implementation of the Tax Regulations Harmonization Law (HPP) is expected to be able to help the government meet the budget deficit target of under 3% of the GDP by 2023. 

In its assessment, Fitch stated that the Joint Decree III, for health financing and humanitarian response in anticipation of the delta variant spread, has been responded by the market positively, indicated by stable bond yields and exchange rates. The decree was proposed between the Ministry of Finance and Bank Indonesia (BI).

Morover, BI's foreign exchange reserves strengthened to USD 145.5 billion at the end of 2021. Foreign investment also recovered in several sectors including the production of electric vehicles. 

"The state budget is still the key policy for controlling and handling the pandemic as well as accelerating economic recovery. In addition, the support for policy credibility and the synergy of the policy mix that remains strong between the government, Bank Indonesia, and the Financial Services Authority have also contributed to this achievement," concluded Puspa.