Standard & Poor’s Ratings Services raised its rating outlook on Indonesia to positive from stable citing improved policy credibility on monetary and financial sector management. The agency affirmed the rating at ‘BB+’.
The positive outlook indicates the possibility that its rating could be raised over the next 12 months provided the government achieves its objective of improving the quality of expenditure.
“The ratings on Indonesia balance the country’s low per capita income and developing policy and institutional settings against the improved credibility of its monetary policy, buoyant economic growth, and sound public finances,” S&P said.
The agency said greater policy effectiveness and predictability helped to lift fiscal and reserve buffers and improved external resilience.
The reform momentum introduced by the new Indonesian Democratic Party of Struggle (PDI-P) administration include reducing fuel subsidies, boosting revenue collection and strengthening land acquisition laws.
However, S&P observed some hesitation to let fuel pump prices move freely with international prices. It also awaits more progress in improving critical infrastructure, resolving legal uncertainties. S&P cited low GDP per capita as another rating constraint.
The agency forecast the economy to expand by 5.5 percent in 2015, supported by high public sector investment.
The material has been provided by InstaForex Company – www.instaforex.com