Standard & Poor's raised Indonesia's sovereign credit rating to investment grade Friday, in line with the other two major rating agencies, in a move likely to attract more investment into Southeast Asia's top economy.
The agency lifted the country's long-term sovereign credit rating to "BBB-,"an investment grade, up from "BB+," junk status, saying the move reflected recent efforts to stabilise the country's public finances. "We believe the government's increased focus on realistic budgeting has reduced the likelihood that a shortfall in future revenue would widen the general government deficit significantly," said S&P in a statement.
Stocks surged 2.59 percent after the announcement. The other two agencies, Fitch and Moody's Investors Services, raised the G20 economy's credit rating to investment grade about five years ago.
Gundy Cahyadi, an economist from Singapore's DBS Bank, said that "in terms of impact, the most significant is likely to be on FDI (foreign direct investment) flows in the coming years."
The move is a boost for President Joko Widodo, who has been seeking to attract more foreign investment and strengthen the economy, which has been slowing in recent years as demand falls for the country's key commodities exports. S&P had previously cited a host of concerns, such as a failure to implement much-needed policies to help the economy, for their reluctance in giving Indonesia an investment grade rating. The decision came after prominent reformist Sri Mulyani Indrawati, a former World Bank managing director, was appointed finance minister last year, in a move cheered by markets. Government coffers were also bolstered by a successful tax amnesty.