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Moody's ups Indonesia view to positive
Moody's Investors Service said it changed the outlook to positive from stable on Indonesia's B1 foreign- and local-currency government bonds, reflecting the steady improvement of the government's debt ratios and external debt position. The outlook on the Ba3 foreign-currency country ceiling for bonds and the B2 foreign-currency country ceiling for bank deposits also was changed to positive from stable. Indonesia's local-currency ceilings for bonds and deposits remain at Baa2.
Indonesia's relative political stability means that the government's prudent fiscal policy is likely to continue for the next several years, Moody's said it said. Last year's government budget deficit of 1.0% of GDP was a continuation of the small deficits recorded during the last several years. Combined with fairly high nominal GDP growth, these modest deficits have resulted in a substantial decline in the ratio of government debt to GDP, the agency said.
The external financial position of the country also is improving, Moody's said it said. The current account increased markedly in 2006 - continuing the record of uninterrupted surpluses since 1998 - which led to both an increase in international reserves and the prepayment of all the country's debt. As a result, external debt ratios showed a significant improvement, the agency said.
Moody's said it believes this trend will continue during the next few years, although its pace could be affected by changes in commodity prices. An upgrade could result from further improvements in the government and external debt ratios, the agency said and further policy reforms that improve the investment environment.
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