Indonesia gets another credit rating rise
Indonesia today saw its credit worthiness raised another notch with Standard & Poor’s Ratings Services (S&P) increasing its long term foreign currency sovereign credit and debt ratings from ‘BB’ to ‘BB+’, with a positive outlook.
“The rating upgrade reflects continuing improvements in the government’s balance sheet and external liquidity, against a backdrop of a resilient economic performance and cautious fiscal management,” said Standard & Poor’s credit analyst Agost Benard.
Indonesia has sustained a high rate of nominal economic growth while its government debt fell to 24% of GDP. Its balance of payment surpluses also saw foreign exchange reserves increase to equal six months of current account payments, reducing Indonesia’s external liquidity risk. Both these factors compare well to similar economies. In its statement, Standard & Poor’s affirmed its previous ‘B’ for Indonesia’s short term foreign currency rating.
The ratings agency also issued some caveats to the good news, saying Indonesia’s rating is constrained by lower than average per capita income, relatively high inflation and vulnerability to external shocks. The 2010 per capita GDP of US$3,037, though double 2004′s figure, is still ‘significantly below’ the median for the ‘BB’ category. There also remained institutional impediments to further growth, such as corruption and uncertain legal requirements, rigid labor restrictions and infrastructure shortfalls.
The overall outlook, however, remained positive and Standard & Poor’s said Indonesia could enjoy a further rise by bringing inflation and its external debt burden under control, and if the government continued to pursue its agenda of administrative reforms to combat the issues listed above.
source: Standard & Poor’s
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