Global rating agency Standard and Poor’s (S&P) Global rated, the COVID-19 outbreak will hitting tourism, transport, trade, manufacturing, and investment in Indonesia - Photo: Special

JAKARTA (TheInsiderStories) – Global rating agency Standard and Poor’s (S&P) Global rated, the COVID-19 outbreak will hitting tourism, transport, trade, manufacturing, and investment in Indonesia. Its also hurting the country’ economy as people minimize going out–private consumption accounts for almost 60 percent of its gross domestic products (GDP).

The agency estimates Indonesia’ economic growth will decelerate to 3.8 percent in 2020, compared with 5 percent in 2019. The recent sharp Rupiah depreciation has compounded risks. The currency decline could gather pace with foreign investors fleeing to the safety of the U.S. dollar.

It said, that would pose a major refinancing risk for Indonesian companies that rely heavily on foreign currency funding. Although the regulations allow companies to increase the share of hedged foreign currency loans, the levels of unhedged foreign-currency debts in corporates are sizable.

According to Ivan Tan from S&P Global, Indonesia being a major commodity producer and exporter, is also susceptible to volatility in commodity prices, which affects banks. Commodity prices, including crude palm oil and coal, have dropped as the COVID-19 outbreak depresses demand.

Last year, Kim Eng Tan, senior director at the agency warned, the government stepped relying on debt securities than foreign debt could harm Indonesian financial conditions. So far, he noted, investors sentiments relatively stable, thanks to the proactive economic policies.

S&P Global believes that Indonesia’ economy remains stable amid the weakening global economy. Structural and fiscal reforms carried out by the government together with stakeholders are an effort to maintain the stability of the economy.

“So the Indonesian economy is still believed to remain robust amid the weakening global economy tension,” Kim ended.

At the same report released on Monday, S&P Global also rated, the economic storm created by the pandemic will test the ratings resilience of the region’ 20 banking sectors. The agency estimate an additional US$300 billion spike in lenders’ credit costs and a $600 billion increase in nonperforming assets in 2020.

“We therefore believe negative rating momentum is likely for some Asia-Pacific banks during 2020,” it said.

Indonesia, India, and Chinese banking systems are the hardest in the Asia Pacific region. Non-performing assets could rise by $600 billion and credit by $300 billion in 2020 in the region, said the rating agency.

Written by Staff Editor, Email: theinsiderstories@gmail.com