Fitch Ratings Upgrades Indonesia's Credit Worthiness a Notch

Fitch Ratings upgraded Indonesia's credit worthiness by another notch, which is good news for a government that has been struggling to kick-start growth.

The ratings firm assigned a BBB rating, one notch above the lowest investment-level grade of BBB- that had been assigned since December 2011.

"Indonesia's resilience to external shocks has steadily strengthened in the past few years, as macroeconomic policies have consistently been geared towards maintaining stability," the company said.

It complimented the sustained rise in Bank Indonesia's foreign-exchange reserves, which hit a record high of $106 billion at the end of November, due to a more flexible exchange-rate policy since 2013.

Despite improving resilience, external challenges remain, including potential pressure from the Federal Reserve's tightening.

The structural reform launched by President Joko Widodo is improving the challenged business environment as shown by a recent 37-notch jump in the country's rank in the World Bank's Ease of Doing Business to 72.

While Indonesia has been struggling to push economic growth beyond 5%, Fitch says the average 5.1% growth over the last five years remains strong compared with the 3.2% median of countries with BBB ratings.

Yet, the relatively low per-capita gross domestic product of US3,780 exhibits some structural weakness on the economy.

Fitch predicts the Southeast Asia's largest economy will grow 5.4% in 2018, similar to the government's target.

On the downside, the government's revenue collection is very low, which constrains its ability to finance infrastructure projects.

Analysts said the latest upgrade may spur more capital inflows into the nation's capital markets.

Write to I Made Sentana at i-made.sentana@wsj.com

(END) Dow Jones Newswires

December 20, 2017 20:31 ET (01:31 GMT)