Wed Jul 10, 2013 6:50am EDT
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July 10 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Indonesia's upcoming USD-denominated global bonds an expected 'BBB-(EXP)' rating. The final rating is contingent on the receipt of final documentation conforming to information already received.
Key Rating Drivers
The rating is in line with Indonesia's Long-Term Foreign Currency Issuer Default Rating (IDR) of 'BBB-'. The sovereign's Long-Term Local Currency IDR is also 'BBB-'. The rating Outlooks are Stable.
The ratings reflect Indonesia's strong and resilient economic growth, supported by high investment and savings rates and low and declining public debt ratios. Pressure on the external finances, a credit weakness, has resulted in some strain on the credit profile, but these are not yet seen as being inconsistent with a 'BBB-' rating. The ratings incorporate Fitch's expectation that policy will be managed in such a way as to prevent economic overheating.
Rating Sensitivities
Fitch believes progress in tackling structural weaknesses, combined with sustained economic growth, without a build-up of external imbalances or a severe inflation shock, would enhance Indonesia's economic and its credit fundamentals and be positive for the ratings over the medium term. Reform of public finances, leading to enhanced budgetary flexibility, would also be positive for the ratings.
A sustained shock to foreign and domestic investor confidence, leading to heavy capital outflows and a material weakening of the external finances would be negative for the ratings. Deterioration in the quality of fiscal or monetary policy management, leading to signs of overheating such as a pick-up in inflation or widening external imbalances, would adversely affect the ratings. Instability in the banking system would also be negative for the ratings.
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