Indonesia Returns To Investment Grade After 14 Years

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Indonesia has finally regained its investment-grade rating from Moody’s Investors Services on Wednesday, more than 14 years after the Asian Financial Crisis compelled credit rating agencies to downgrade the country’s sovereign debt rating to junk status.

The decision by Moody's comes after a similar rerating by Fitch Ratings last month, with most analysts expecting Standard & Poor's to follow suit in the next couple of months as well.

Indonesia, whose economy has grown by around 6 percent annually in recent years, is seen to be now thriving thanks to several years of political stability under President Susilo Bambang Yudhoyono, who has managed to boost the nation’s social and economic infrastructure, as well as strengthen governance in finance since being elected in 2004.

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According to Chua Hak Bin, an economist for Merrill Lynch in Jakarta, an upgrade to Indonesia's credit rating has been long overdue.

"It is about time, since Indonesia has balanced fiscal and robust future growth," said Chua in an interview with AFP. "With this, there will be a larger pool of funds especially for government bonds. There will be more countries that are now able to invest in Indonesia."

The price for Indonesia government bonds has also surged in recent years. In the last 12 months alone, Indonesia’s 10-year bond yields have fallen from 9 percent to about 6 per cent.

Furthermore just last week, Indonesia managed to achieve a record-low yield for its 30-year bonds at a 5.375 percent, raising $1.75 billion in the process.

“Demand for our bonds will increase and yields will continue trending lower,” said the director general of debt at Indonesia's Finance Ministry Rahmat Waluyanto to the Wall Street Journal.

"A stable outlook will attract investors back to Indonesia not only in bonds and stock markets, but foreign direct investment will also increase," added Hartadi A. Sarwono, deputy governor of the Indonesian central bank, to the BBC.

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Moody’s upgrade now means that Indonesia is on par with other major emerging economies such as India. The upgrade also helps previous calls by the Indonesian government for investors to classify the country in the same category as the so-called "BRICS" economies—Brazil, Russia, India, China and South Africa.