JAKARTA GLOBE/JAKARTA

Jakarta, 15 December 2011 - Indonesia’s sovereign debt rating was raised to investment grade on Thursday by Fitch Ratings, who cited the country’s “strong and resilient” economy.

The decision, an endorsement of the country’s economic progress, will encourage investment in the country and drive down the cost to the government of raising money to fund spending.

The rating assessor said it raised Indonesia’s long-term and local currency debt rating to BBB- from BB+, putting the country into investment grade 14 years after the Asian financial crisis crippled the region.

“The upgrade reflects the country’s strong and resilient economic growth, low and declining public debt ratios, strengthened external liquidity and a prudent overall macro policy framework,” said Philip McNicholas, director of Fitch’s Asia-Pacific sovereign ratings group.

Indonesia spent more than Rp 450 trillion ($150 billion at the time) to bail out lenders during the 1997 financial crisis, when its rating was lowered.

Fitch Ratings forecast Indonesia’s $700 billion economy to grow by more than 6 percent annually in the next two years, despite global economic woes.

“Indonesia’s domestically oriented economy and success in delivering relatively strong economic growth, without the creation of external imbalances, or a reliance on short-term external financing, suggests economic growth prospects should prove resilient to external shocks,” Fitch said. “Low public debt and positive real interest rates give the authorities policy flexibility to respond to any slowdown.”

Analysts and economists in Jakarta said that Indonesia should have been upgraded much earlier due to its strong economy and good debt management.

Moody’s Investors Service raised Indonesia’s sovereign rating in January to Ba1 while Standard & Poor’s increased the country’s long-term foreign currency rating to BB+ from BB in April. The Moody’s and S&P ratings are one notch below investment grade.

“We welcome this long-awaited positive news. Technically, It should open up a universe of domestic investments that foreign funds are allowed to invest in,” said Jeffrosenberg Tan, head of research at Sinarmas Sekuritas.

But Jeffrosenberg played down the significance of the investment grade rating.

“Our rating should be a lot better than highly indebted developed countries. Judging from the relative strength of our sovereign balance sheet compared to our developed counterparts, Indonesia should have been awarded [the rating] a lot sooner,” he said.

Fitch said that Indonesia’s strong foreign exchange reserve put the country in good position to shield itself from the impact of the euro zone debt crisis.