Moody's: Indonesia's Buffer M'ment To Determine Impact Of Challenges

Moody's Investors Service says in a new report that Indonesia's (Baa2 stable) key growth drivers are under significant strain this year. While growth should rebound next year, a halt to reforms in state-owned enterprises, the corporate sector, infrastructure and human capital development, as well a prolonged weakness in commodity prices present downside risks to a sustained growth recovery. The extent of fiscal erosion is intrinsically tied to the growth recovery. "Under our base case, Indonesia's fiscal deficit and debt burden will both rise but remain in line with the Baa-median, because of its stronger starting points and the fact that its budgetary deterioration has been less than that of its rating peers," says Anushka Shah, a Moody's Vice President and Senior Analyst. "But a slower recovery presents risks to these assumptions and would strain the government's debt affordability, which was already weak pre-coronavirus," adds Shah.

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