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Investing.com -- S&P Global Ratings has affirmed Indonesia’s sovereign credit ratings at ’BBB’ long-term and ’A-2’ short-term with a stable outlook on Tuesday.
The rating agency cited Indonesia’s robust growth prospects, prudent policy settings, and relatively light net external and government debt burden as key strengths supporting the ratings.
S&P expects Indonesia’s economy to grow at close to 5% annually over the next two to three years, despite some weakening in domestic demand earlier this year partly due to reduced infrastructure spending.
The stable outlook reflects S&P’s expectation that the Indonesian government will maintain its 3% annual deficit ceiling as an important policy anchor. The country’s continued development of commodity-related industries is also expected to contribute to stable external metrics over the next two to three years.
S&P forecasts Indonesia’s fiscal deficit to rise to 2.6% of GDP this year and 2.9% by 2028, from 2.3% in 2024, as government expenditure programs gather pace. Net general government debt is projected to increase to 37% of GDP by the end of 2028, from 36% in 2024.
The rating agency noted that Indonesia’s GDP per capita this year is estimated at $5,000, up from $4,900 in 2024, with trend economic growth at 3.8%, which is better than most economies of similar income levels.
S&P expects current account deficits to remain narrow over the next three years, with narrow net external debt averaging 66.6% of current account receipts over 2025-2028.
The agency forecasts average consumer price inflation of 2.4% over 2025-2028, within the government’s 2025 inflation target range of 1.5%-3.5%.
S&P indicated it could raise Indonesia’s ratings if material improvements in the country’s external metrics result in narrow net external debt falling below 50% of current account receipts and gross external financing needs going below 50% of the sum of current account receipts and usable reserves.
Conversely, the ratings could be lowered if net general government debt rises at an annual rate of more than 3% of GDP consistently, if government interest payments exceed 15% of revenue on a sustained basis, or if there is a structural slowdown in export receipts.
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