Moody's upgrades RI rating to one notch below investment grade

JAKARTA. Moody's Investor Services on Monday upgraded Indonesia’s sovereign credit rating to one notch below investment grade, a statement released on Monday shows.

According to the statement, the top rating agency upgraded Indonesia's rating from Ba2 to Ba1 with a stable outlook, citing economic resilience, macroeconomic balance, an improving government debt position and the central bank's foreign currency reserve adequacy as well as prospects for foreign direct investment inflows.

"We have upgraded the sovereign credit ratings as momentum in the economy is expected to be sustained by steady domestic demand, a reasonable pace and sequencing of policy and structural reforms, and rising foreign direct investment.

"Furthermore, Indonesia’s debt position and reserve adequacy remain on an improving trajectory relative to most of its ratings peers," says Aninda Mitra, a vice president at Moody's and its lead sovereign analyst for Indonesia.

Moody's, however, still considers key risks to the rating outlook to be mainly embedded in Indonesia’s political system.

"Opposition from coalition partners has slowed the government's drive to implement far-reaching economic reforms," the agency says, adding that this opposition has not impacted overall policy management capabilities or near-term economic prospects.

Nonetheless, Moody's notes that adversarial or obstructionist politics that impede policy making and banking supervision could make investor confidence suffer and financial market pressure could increase.

Earlier, Finance Minister Agus Martowardojo has said he hoped Indonesia would receive achieve investment grade accreditation from top rating agencies this year, following its stellar economic performance in 2010. (The Jakarta Post)