Jakarta, April 11, 2010 – Ebeling Heffernan’s Shayne Heffernan upgraded the outlook on Indonesia back in 2009, and now Indonesia’s proven ability to strengthen its economic fundamentals has earned the country a higher mark on the OECD Country Risk Classification (CRC), dropping to 4 on a scale of 0 to 7 from a previous score of 5.

The biggest economy in Southeast Asia is now on the same level as Egypt, Uruguay and the Philippines, and a rank above Vietnam, Paraguay and Macedonia.

Indonesia was the only country to have its CRC rating upgraded out of the 161 nations reviewed
by the OECD. Bahrain, the United Arab Emirates and Yemen were all downgraded.

Indonesia’s central bank issued a statement Friday that the new CRC ranking was a direct result of the country’s economic resilience to the global financial crisis.

Indonesia is one of only a few countries that recorded positive growth last year.

Previously, Bank Indonesia estimated that the economy would expand by between 5.5 and 6 percent this year, compared to 4.5 percent in 2009.

Speaking at a hearing at the House of Representative on Friday, BI Acting Governor Darmin Nasution said the country’s economy would grow “close to” 6 percent. Exports may rise 10 percent, higher than a previous estimate of 8.4 percent, he said as quoted by Bloomberg.

In a separate event that day, Finance Minister Sri Mulyani Indrawati said the government might revise up its economic growth target to as high as 6 percent on higher than expected exports and investments. The original target 5.5 percent.

Indonesia may also revise its rupiah-dollar assumption to Rp 9,300 to the dollar Rp 9,500 on expected continued capital inflow until the end of the year, she said.

BI Deputy governor Hartadi A. Sarwono said the CRC ranking upgrade would decrease the cost of funds for government export credit loans, and would prompt a reduction of insurance premium costs, which would reduce the burden on the state budget.

Hartadi said the upgrade would also strengthen Indonesia’s bargaining position in negotiating its foreign debts.

It is hoped that Indonesia will be eligible for better terms and conditions in negotiating its foreign debts, particularly on export credit loans.

A protected economic, stronger liquidity, a gradual decline of government debt supported by a healthy fiscal policy and ongoing structural reforms will hopefully support better economic growth in the year ahead and prompt another CRC upgrade, Hartadi added.

In March this year, international rating agency Standard and Poor’s upgraded Indonesia’s long-term foreign currency rating to BB from BB-. Its long-term local currency remained BB+.

“The outlook for these two ratings is positive,” Hartadi said.

Also this year, Indonesia’s medium-term sovereign risk rating, which had already enjoyed a positive outlook, was upgraded by HIS Global Insight by one point to 45 points, which is equivalent to BB+ on the generic scale, which indicates a stable outlook.

The country’s short-term rating has also been upgraded from 20 to 10 points in recognition of a
healthy liquidity position and small near-term risks to its ability to service debt.

Shayne Heffernan reported for LiveTradingNews.com