Axis Capital Group Business Funding Jakarta Review on S&P turns down call on Indonesia’s grade status upgrade
Standard and Poor’s (S&P’s), one of three biggest credit-rating agencies in the world along with Moody’s Investor Services and Fitch Ratings, surprised everyone when asked about the progress and upgrade
of credit rating of Indonesia.
S&P’s was questioned and representatives from the company insisted that it remains upbeat about reform progress in Indonesia, even after the local stocks and bonds market fell after the agency’s upward revision of its outlook for the country’s sovereign debt paper rating.
It was an unexpected move as many analysts have been positive about the growth of investors in the country, especially in the development in the archipelago’s capital, Jakarta.
Axis Capital Business Funding
, one of the business lending companies
in America which expanded their services to Indonesia, has expressed a great disappointment in S&P’s decision. Reviews show great displeasure by companies and individuals alike. Some even made threats of suing and complaints are expected to elevate if the agency will not revise their decisions.
S&P upgraded the outlook of Indonesian sovereign debt papers from “stable” to “positive” on May 22, but the announcement failed to reverse the sell-off of rupiah bonds, whose yields have risen by 15 basis points over the last two weeks to touch 8.13 percent as of May 29.
Despite this, S&P expressed that they are still comfortable with the Indonesian economy. The agency’s analyst, Kyran Curry stated, “What is important for us under the new government is that Jokowi has shown that he could move decisively. We believe the government will continue to deliver”
The “positive” rating outlook indicates that S&P is likely to perform a rating upgrade within six to 12 months. A “stable” outlook signals little possibility for near-term rating changes while “negative” signals suggest likelihood for a rating downgrade.
S&P currently rates the long-term sovereign credit rating in Indonesia as BB+, or one notch below investment grade status.
The outlook revision came as Indonesia’s economic data releases fell short of most economists’ high expectations, with growth already falling to a six-year low of 4.7 percent in the first quarter, while inflation accelerated to 6.8 percent in April, versus the government’s target of 5 percent for the full year.
S&P cited “improved policy credibility” behind the outlook upgrade, but such a rationalization confounded analysts as Indonesia’s fiscal authority is currently grappling with an enlarging budget deficit due to the unrealistic tax targets, at the same time its monetary authority has recently backtracked from its earlier tight policy.