Indonesia’s Investment Grade Boosted despite the Global Economic Turmoil

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Recently, Fitch Ratings, the global rating agency has readjusted Indonesia’s investment grade with stable outlook, formerly “BB+” to “BBB-“. With this new improvement, thus Indonesia marks itself as one of the proper investment grade countries and the so-called emerging markets.

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The investment grade displays the Indonesia’s improvement on external liquidity as well as more prudent policies on macroeconomics. Fitch projected that Indonesia’s GDP growth will reach over 6% per year (to 2013), despite the global economics turmoil.

Indonesia has domestic-oriented economic typical and robust economic growth, thus eliminating its dependency to long-term funding. It means that the external economic turmoil taking place at the moment, beginning in year 2008 does not affect them too much.

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Although Indonesia’s liquidity ratio is 119% (below the median ‘BBB’ grade 140%), but its basic balancing was projected surplus. That mitigates the threat of ‘hot money’ in Indonesia.

However, Fitch also highlighted several structural shortcomings such as per capita income and low fiscal absorbing, shallow domestic financial market and another problems in infrastructure quality and war against corruption. However, those factors were somehow less-affecting the Indonesia’s inclining investment grade.

Previously, Indonesia lost its investment grade due to the monetary crisis, which occurred in middle 1997. Things become more favorable when the new accomplishment on 2011 has readjusted Indonesia’s position in the same level with India.

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