Credit ratings agency S&P Global Ratings has affirmed Indonesia’s sovereign credit rating at BBB/A-2 with a stable outlook, offering reassurance to investors concerned about fiscal pressures under President Prabowo Subianto. Monday’s decision reflects the agency’s view that recent fiscal strains are temporary and can be addressed through stronger commodity prices and spending adjustments, standing in contrast to actions taken by other major agencies.
Moody’s and Fitch cut their debt-rating outlooks for Indonesia to negative in February and March respectively, citing reduced policymaking credibility amid rising fiscal concerns under Subianto’s stewardship. S&P’s affirmation reflects Indonesia’s growth prospects and relatively light net external and government debt, the agency said, adding that it expects government revenue to keep recovering this year and export receipts to rebound with higher commodity prices.
S&P also pointed to Indonesia’s policies to boost revenue and export earnings from the resource sector, which it said should lift revenue over time and support the rating outlook. “The stable outlook also reflects our expectation that the government continues to view its 3% annual deficit ceiling as an important policy anchor,” the agency added. It also cited the government’s flexibility in adjusting the budget when necessary, including making deep spending cuts to keep the deficit below the legal threshold.
S&P said the rating could be downgraded if government debt, interest costs or external financing needs worsen significantly, while it could be upgraded if fiscal and external finances improve sustainably through lower deficits, stronger revenue, lower borrowing costs, and reduced external debt. The agency expects economic growth of around 5% in the coming periods, underpinned by resource exports such as coal, palm oil, and liquefied natural gas.
The Indonesian government and Bank Indonesia said the rating reflects global investor confidence in the country’s economic management, supported by solid fiscal-monetary coordination. Bank Indonesia Senior Deputy Governor Destry Damayanti told Reuters there is significant room for the rupiah to strengthen, especially as investor confidence improves. The rupiah has been trading near its historic low of around 18,000 rupiah to the US dollar, a level first reached last month, for the past few days.
Concerns over Indonesia’s fiscal management and volatility in global markets have battered the currency, forcing the central bank into an off-cycle interest rate increase.
“While it’s not time for complacency, we’ll take this as a win, and we continue to expect policy reforms and fiscal discipline to become more evident in the second half of the year, supporting a further recovery in confidence,” said SGMC Capital fund manager Mohit Mirpuri.
Analysts welcomed the affirmation as a signal that prudent policy adjustments could stabilise investor sentiment, a development seen as significant given market pressures earlier in the year, including bond sell-offs, and currency weakness. Indonesian authorities have emphasised ongoing efforts to enhance revenue collection through reforms in the resource sector and improved budget execution, measures intended to support the 3% deficit ceiling while maintaining essential public investments.
Local assets saw modest gains following the announcement, reflecting relief among investors, though officials have cautioned against complacency and stressed the need for continued fiscal discipline. With its large population and resource wealth, Indonesia remains a key emerging market destination, though global factors continue to influence its financial conditions.
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