Indonesia’s Outlook Changed to Positive From Stable at Fitch

Indonesia’s credit rating outlook was changed to positive from stable by Fitch Ratings, citing the potential of reforms in the past year supporting growth in Southeast Asia’s largest economy.

The country’s BBB- rating was affirmed, Fitch said in a statement on Wednesday. Indonesia still retains junk status at S&P Global Ratings, which said in October it was concerned by the country’s rising bad debts and risks to the growth outlook.

“A strong structural reform drive since September 2015 is gradually improving the difficult business environment, and is likely to support the growth outlook in the medium term,” Fitch said in the statement. The rating company expects Indonesian economy to accelerate at 5.1 percent this year, 5.4 percent in 2017 and 5.77 percent in the following year.

President Joko Widodo, also known as Jokowi, has pushed through a tax amnesty program this year that’s earned the government about 100 trillion rupiah so far, helping to ease pressure on the fiscal deficit. He has also pledged to ramp up spending on new roads, ports, railways and airports to boost economic growth to 7 percent. Growth has been lagging following a slump in commodity prices and the central bank now forecasts expansion at 5 percent this year and 5 percent to 5.4 percent next year.

Strengthening external balance, continued improvement in business environment and maintenance of sustainable growth rate above rating peers may trigger a rating upgrade, Fitch said. Any potential external financing difficulties and increase in public debt burden can return the country’s outlook to stable, it said.

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