Singapore, July 10, 2013 -- Moody's Investors Service, ("Moody's") has assigned a provisional rating of (P)Baa3 rating to the Government of Indonesia's announced bond offering on its existing U.S. dollar-denominated global medium-term note program. The outlook is stable.

RATINGS RATIONALE

Indonesia's Baa3 sovereign issuer rating incorporates a moderate assessment of the country's overall economic strength that balances
robust growth performance against relatively low GDP per capita. While real GDP growth came in above 6% for the third consecutive year in 2012, rising inflation, policy tightening, and lower prices for Indonesia's commodity exports could weigh on economic growth in 2013. Nevertheless, trend growth is likely to be maintained above those of similarly rated countries over the medium term.

Prudent fiscal management has contained budget deficits at low levels and has steadily reduced the government's debt burden as a share of GDP over the past decade. As a result, Indonesia's fiscal and debt ratios are now more favorably placed than many of its higher-rated peers. Fuel subsidy reforms passed in June 2013, the first since 2008, addressed an increasingly large strain on the government's finances and will likely keep the fiscal deficit under the legal deficit cap of 3% of GDP.

As the current account is now likely in a structural deficit, recent capital flow volatility has further weighed on the balance of payments and contributed to weakness of the rupiah. While FDI inflows continue to be healthy and mitigate external pressures, foreign exchange reserves
have fallen to $98.1 billion as of June 2013 from $112.8 billion at end-2012. These reserves remain adequate to meet the country's external payment obligations over the immediate one- to two-year horizon.

Other challenges to the rating include the relatively shallow depth of Indonesia's capital markets, manifested in fairly large non-resident
ownership of government securities. Regulatory and policy uncertainty may continue to affect sentiment in the lead-up to the presidential elections in 2014.

The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.