Jakarta – Indonesia’s economic outlook faces increased scrutiny following a decision by Moody’s Investors Service to revise the country’s credit outlook to negative, while maintaining its long-term debt rating at Baa2 – just above non-investment grade. The move, announced on , reflects growing concerns about the country’s fiscal strength and external vulnerability, despite recent positive economic growth data.
Finance Minister Purbaya Yudhi Sadewa responded to the Moody’s report with cautious optimism, emphasizing the recent rebound in economic growth. Indonesia’s economy expanded by 5.39% in the fourth quarter of 2025 and achieved overall growth of 5.11% for the year, a significant improvement from previous periods. “The economy has turned around, faster than before,” Sadewa stated. “Going forward, it will improve further, and I think growth will be faster. I believe Moody’s will gradually see what is happening here more fairly.”
The timing of Moody’s decision is notable. Sadewa suggested the rating was released before the official publication of the fourth-quarter growth figures by the Badan Pusat Statistik (BPS), Indonesia’s statistics agency. He expressed confidence that a reassessment following the release of the data would yield a more positive outlook. “Perhaps they released it before the growth figures came out. If the growth figures had already been released, I think the numbers would be slightly different,” he said.
The Minister pointed to Indonesia’s fiscal management and controlled deficit as key strengths. “From the fiscal side, we are moving in the right direction, growth is better, and the deficit is still under control. We have successfully reversed the economic direction at a relatively minimal cost,” Sadewa added. He dismissed the possibility of a further downgrade, arguing that Indonesia’s ability and willingness to service its debt are both demonstrably strong. “There isn’t a strong reason for a downgrade. In fact, we should gradually see prospects for an upgrade, perhaps after the end of the year when our economy grows by 6% or more.”
Moody’s decision contrasts with recent developments in neighboring Pakistan, where the agency upgraded the country’s ratings to Caa1 and shifted its outlook to stable. This divergence highlights the differing economic trajectories and risk profiles of the two nations.
The Moody’s outlook revision comes at a sensitive time for Indonesia, as global markets grapple with uncertainty stemming from U.S. Fiscal concerns and geopolitical tensions. These factors are contributing to volatility in asset prices, including gold, which analysts say is being driven by safe-haven demand. Indonesia’s vulnerability to external shocks, particularly fluctuations in commodity prices and global capital flows, is a key consideration for rating agencies.
Beyond the immediate impact on investor sentiment, the Moody’s decision could lead to higher borrowing costs for the Indonesian government and corporations. A negative outlook signals increased risk, prompting investors to demand higher yields on Indonesian debt. This could constrain the government’s ability to finance infrastructure projects and social programs, potentially dampening economic growth.
However, Sadewa remains optimistic, emphasizing the government’s commitment to maintaining fiscal discipline and promoting sustainable economic growth. He believes that continued improvements in economic fundamentals will eventually persuade Moody’s to revise its outlook back to stable. The focus, he stated, will be on “improving the fundamental economy” and achieving growth rates of 6% or higher.
The situation also underscores the increasing importance of fiscal and monetary policy in shaping Indonesia’s creditworthiness. As Kompas.id reports, despite the maintenance of Indonesia’s credit rating, the direction of these policies will be crucial in determining the country’s future credit trajectory.
The coming months will be critical for Indonesia as it seeks to demonstrate its resilience in the face of global economic headwinds and regain the confidence of international rating agencies. The government’s ability to deliver on its growth targets and maintain fiscal stability will be closely watched by investors and policymakers alike.
Meanwhile, reports from Bloomberg suggest that Prabowo’s economic policies are putting Indonesia on a collision course with global markets, adding another layer of complexity to the country’s economic outlook.
