Hong Kong. Moody's Investors Service raised the outlook on Indonesia's local and foreign debt to positive from stable, underlining the country's ability to sustain strong economic growth and praising the stability and effectiveness of its fiscal and monetary policies.

It has a rating of Ba2 on south east Asia's largest economy, two notches below investment grade.

"A series of external disturbances, culminating most recently in instability in several European sovereign debt markets, have had no serious implications on Indonesia's credit fundamentals, which remain on an improving trend," the agency said in a statement.

The agency said the Indonesian government remained committed to political and financial stability. This was reflected in the recent crackdown against militant groups in the country and appointments and nominations at the Finance Ministry and the central bank.

Rival Standard and Poor's has a foreign currency rating of BB, two notches below investment grade, while Fitch has assigned a BB-plus rating, the highest speculative grade rating.