A credit rating upgrade to one step below investment grade for Indonesia by Moody's Investors Service was overdue given the persistent improvement of the country's economy in the past few months, a government official says.
Investment Coordinating Board (BKPM) chair Gita Wirjawan said Monday Moody's rating upgrade was overdue.
"The rating upgrade is a good thing despite its being overdue, because our macroeconomic conditions have been continually improving," the investment chief said, as quoted by news portal detikfinance.com.
Gita said that with its sound economic fundamentals, Indonesia deserved a higher credit rating grade.
Economic observers said economy-wise, Indonesia deserved an "investment grade" ranking for the past few years, but factors apart from the economy such as corruption and the country's complicated bureaucracy have hampered an upgrade for the country's credit rating.
Bank Indonesia (BI) Governor Darmin Nasution also welcomed the rating upgrade, saying it would attract more foreign direct investment as Indonesia would now be a more attractive destination to do business.
"We hope the new rating will improve to 'investment grade' in the next year. We need to fill in the gap between other countries that have been categorized as 'investment grade'," Darmin said in a statement Monday.
After more than a month of review, Moody's upgraded the Indonesian government's foreign and local-currency bond ratings by one notch to "investment grade Ba1" with a stable outlook, the highest level since the Asian financial crisis hit the country hard in 1997.
Investment grade is a rating that indicates a government or corporate bond has a relatively low risk of default.
Moody's cited the country's economic resilience and sustained macroeconomic balance, the government's improving debt position and adequate foreign currency reserves, as well as the prospects for foreign direct investment inflows as the main reasons for the rating upgrade.
However, Moody's also noted several risks for Indonesia's economic outlook with the key risks "mainly embedded in the country's political system".
"Opposition from coalition partners has slowed the government's drive to implement far-reaching economic reforms," Moody's vice president and lead sovereign analyst for Indonesia Ananda Mitra said.
The government is hoping for an eventual graduation to "investment grade" from top international rating agencies this year.
Rahmat Waluyanto, director general of the Finance Ministry's debt management office, said the Moody's upgrade was special because it was issued during hard economic times for other countries.
"This will add to investor confidence, especially foreign investors," Rahmat told The Jakarta Post, citing the potential for more capital inflows.
Indonesia received a total of US$13 billion in foreign funds through the nation's stock and debt markets in 2010, raising concerns that such excessive amount of foreign funds could create shock and hurt the economy if a sudden reversal occurs. (est)