President Joko Widodo (Image : Special)

JAKARTA (TheInsiderStories) – The Indonesian Economic Minister has lauded the decision of the International rating agency, Fitch Ratings, to have upgraded Indonesia’s Sovereign Rating, much earlier than expected. The move is expected to further strengthen investor confidence in this country’s economy.

On Thursday (Dec. 21), Fitch Ratings decided to reset Indonesia’s Sovereign Rating to ‘BBB’, with a ‘stable outlook’, the highest rating bestowed since 1995.

Fitch explained how rating drivers are determined: Indonesia’s resilience to external shocks (a factor that has steadily strengthened in the past few years), its debt management policies and an improved overall business climate.

Finance Minister Sri Mulyani Indrawati expressed her appreciation for Indonesia’s second sovereign rating upgrade this year, saying that this will help free the country from the negative sentiment triggered by policy changes in advanced countries, including the approval of a US taxation reform plan by the US Senate.

“Given that Indonesia is recognized internationally for its better foundation, it will be able to rise above negative sentiments. We have the additional endurance to avoid such a perception,” she said on Thursday.

She is confident that Indonesia is reliable enough for to invest and conduct business, particularly since the nation’s economic growth is expected to be higher next year.

President Joko Widodo, she added, has also handed down an instruction to improve various ways to create a more conducive investment climate, with the aim of spurring economic growth.

Coordinating Minister for Economic Affairs Darmin Nasution also welcomed the upgrade, stating that this achievement is certainly comparable to that of peer countries such as India and Turkey.

He hoped that economic growth could continue, the quality also rising as measured by declining unemployment, alleviated poverty and less inequality.

All of those objectives, Nasution believes, can be achieved with a combination of policies that the government has implemented, such as infrastructure development, sectoral policies in the tourism industry and equality policies.

“We continue to sharpen and develop,” he said.

Governor of Bank Indonesia (BI) Agus Martowardojo voiced similar feeling on the Fitch upgrade. “Going forward, BI will continue its commitment to maintaining macroeconomic and financial system stability to support strong, sustainable, balanced, and inclusive economic growth,” said Martowardojojo.

Bank Mandiri Chief Economist Anton Gunawan said at a media briefing on Thursday that the sovereign rating upgrade is a ‘vote of confidence’ toward the country’s economy. “The rating upgrade comes earlier than what we had expected. This is positive for the country’s economy,” he said.

Gunawan said that the government should pay more attention to its looming budget deficit since it is of concern to investors. “Thus, tax reform is an important element, ensuring that the government’s revenue stream is well-guarded,” Anton Gunawan said in his office on Thursday.

In its report, Fitch did point to the inadequate intake of government revenues, as Indonesia is one of four countries that has the least government revenue as a percentage of GDP.

This, Fitch noted, hinders direct government financing for infrastructure projects and increases dependence on state-owned enterprises (SOEs) to address large infrastructure deficits.

Written by Staff Writer, Edited by Roffie Kurniawan, email: roffien@theinsiderstories.com