Pacific Money | Economy | Southeast Asia

Ratings Agency Maintains Indonesia Credit Rating, Predicting Economic Recovery

The news will no doubt come as a relief for the Prabowo administration, whose economic policymaking has spooked international investors.

Credit ratings agency S&P yesterday affirmed Indonesia’s current sovereign credit ratings, stating that its outlook for the country’s economy remained “stable.”

In a statement, S&P said it was reaffirming its BBB/A-2 sovereign credit ratings, arguing that the country’s recent fiscal strains, which it put down to “high energy prices, higher interest rates, a weak currency, increased policy uncertainties, and accumulated debt,” were likely temporary.

S&P said that Indonesia’s policies to boost revenue and export earnings from ​the resource sector should also lift revenue over time, supporting the rating outlook.

“The stable rating outlook reflects our expectation that government revenue will continue to recover this year and export receipts will rebound with higher commodity prices,” it stated.

The news will no doubt come as a relief for Prabowo’s administration, which has recently courted friction with international investors. Since coming into office in October 2024, Prabowo has pursued high-spending populist social policies, including a multibillion-dollar free meal program, that have pushed the budget toward its 3 percent annual deficit ceiling. The former general has also increased the state’s involvement in the Indonesian economy in a bid to maximize the country’s return from natural resources and international trade.

These policies, along with the firing of respected Finance Minister Sri Mulyani Indrawati last year, has unsettled investors and undermined Indonesia’s hard-won reputation for fiscal conservatism.

Earlier this year, fellow ratings agencies Moody’s and Fitch cut ‌their debt rating outlooks for Indonesia to negative, citing the unpredictable and fiscally expansive nature of economic policymaking under Prabowo. The latter cited the “increasing ⁠policy uncertainty and erosion of Indonesia’s policy mix consistency and credibility” and the “growing centralization of........

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