Fitch drops Indonesia outlook to stable

Fitch Ratings said it revised the outlook on the foreign currency and local currency issuer default ratings of the Republic of Indonesia to stable from positive, while affirming both ratings at BB-. The agency also affirmed Indonesia's B short-term issuer default rating and the BB- country ceiling.

The outlook revision reflects risks to the external balance sheet that need to be addressed with greater urgency and importance, the agency said. The reversal towards a weakening in the current account balance position coincides with a period of heavy public sector amortization payments.

Looking ahead, Fitch said the resilience of the external position will require accelerated efforts to build sustainable capital inflows, particularly in the form of foreign direct investment, and to stem other capital outflows, which have been persistent in recent years. Otherwise, the agency said it believes the country could risk an interim rundown in its foreign exchange reserves.

More positively, Fitch forecasted that the fiscal deficit will stay manageable at below 1% of GDP this year, while the government debt-to-GDP ratio of 41% is lower than the 46% median for the BB rating category. Political fortitude, a strong grasp over the legislature and rational policy initiatives have helped Indonesia steer through periods of instability during the period of high oil prices, rising inflationary expectations and volatile currency movements in the second half of 2005, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.