Financial Services Authority commissioner Nelson Tampubolon (from left), Finance Minister Sri Mulyani Indrawati, Coordinating Economics Minister Darmin Nasution and Bank Indonesia governor Agus Martowardojo take part in a working meeting with members of House of Representatives’ Commission XI at the House complex in Senayan, Jakarta, on Thursday (9/2).
JAKARTA, KOMPAS – The recent move by Moody\'s international rating agency to raise its outlook on Indonesia\'s sovereign debt from “stable” to “positive” indicates strong signs of improvement in the country’s economic fundamentals. However, its impact on the financial markets has not been felt.
On Thursday (9/2), no significant inflow of foreign funds was seen entering the Indonesian financial market.
Coordinating Economic Minister Darmin Nasution said that the improvement of Indonesia\'s sovereign debt outlook would have a positive impact on investment in Indonesia because it would improve investor confidence.
However, Darmin warned, sentiment and business confidence in Indonesia were not solely determined by the rating agencies. "Outlook rating improvements have a positive impact. But the world is not only influenced by one vote. There are other issues, such as Donald Trump’s policies, for example, which will have an effect," Darmin said.
According to Finance Minister Sri Mulyani Indrawati, holders of government bonds (SUN) and potential investors could see the potential of investing in Indonesia. Therefore, the SUN would have more realistic prices so that the government did not have to pay too high a yield.
She said that Moody’s positive assessment indicated improvements to a variety of economic fundamentals in the Indonesian economy. "We must remain vigilant because in 2017 there are still many uncertainties in the world that cannot be predicted," she noted.
Related to the impact of political stability and security, Sri Mulyani said that a country’s economy could not separated from other factors, such as social and political issues. Investors, including international rating agencies, would see if the mechanism used by Indonesia to resolve these issues was credible. "Rating agencies like Moody\'s are much more rational when observing a variety of changes," she noted.
Meanwhile, Bank Indonesia governor Agus DW Martowardojo said that the improvement of Indonesia’s rating was acknowledgment of the country’s success in maintaining macroeconomic stability and financial systems. The move made the climate more conducive to sustain economic growth.
Indonesia\'s economy grew 5.02 percent in 2016. In 2017, Indonesia\'s economic growth target is 5.1 percent.
According to Indonesian Employers Association (Apindo) chair Sukamdani Hariyadi, Moody’s move had strengthened investor confidence and confirmed investor perception that the Indonesian economy was doing relatively well so far.
Businessman Teddy Rachmat said that investor confidence should be maintained. "The political and security situation ahead of the local elections should not disturb investor confidence," he said.
Separately, Indonesian Chamber of Commerce and Industry (Kadin) deputy chair for employment and industrial relations, Anton J Supit, said the change in Moody\'s rating should be followed by improvements to the investment climate and the employment sector.
Currently there are about 128 million workers in Indonesia. Of that number, nearly 60 percent work in the informal sector.
Waiting
The financial market is still waiting for Standard & Poor\'s (S&P) to improve Indonesia’s rating to investment grade. "I think it is still difficult to obtain this ranking this year," said MNC Securities head of research Edwin Sebayang.
Meanwhile, Taye Shim, Mirae Asset head of research, said the rating improvement had had no significant impact on the financial market because the good news had been anticipated. It was not something that would cause changes.
"We believe Moody\'s rating improvement will add pressure on S&P because the change will make investors question S&P’s credibility," said Taye.
Director of mutual fund investment portal Bareksa, Fajrin Noor Hermansyah, said that the improvement in Indonesia’s credit rating would give investors more confidence in Indonesia, particularly in the capital markets.
