Moody’s affirms Indonesia’s long-term issuer ratings at Baa2

MOODY’S said on Tuesday (Apr 16) it has affirmed Indonesia’s local and foreign currency long-term issuer ratings at Baa2, citing continued economic resiliency, prudent fiscal and monetary policies in the South-east Asia’s biggest economy.

The rating agency said in its report that its baseline assumption is that Indonesia’s track record of fiscal discipline will continue, thus supporting a stabilisation in the debt burden around current levels.

Moody’s pointed out that the free meal programme for students proposed by president-elect Prabowo Subianto could have a wide range of implications depending on the form it is ultimately implemented in.

In its original form, the programme could cost more than 400 trillion rupiah (S$33.7 billion), or around 2 per cent of gross domestic product (GDP), which would result in the fiscal deficit materially widening to cross the budget deficit ceiling at 3 per cent of GDP, Moody’s said.

“Looking ahead, key changes to fiscal policy will arise from the final form that the free meal programme ... will take. However, our baseline assumption is that implementation will be more gradual and targeted.” the agency said.

Prabowo, the current defence minister, and Gibran Rakabuming Raka, the eldest son of outgoing President Joko Widodo, are set to be sworn in as new president and vice-president in October following a resounding victory in February’s election.

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Moody’s also maintained the stable outlook for Indonesia, while expects Indonesia’s annual economic growth to remain at the level of its pre-pandemic average of around 5 per cent for 2024 and 2025, supported by solid domestic demand that offsets a relatively weak external environment.

Indonesia’s government has set 2024’s economic growth target at 5.2 per cent and 2025 at range of 5.3 to 5.6 per cent. REUTERS