The economic rating agency, Fitch, predicts that the Indonesian economy will rise in 2022.
Three world rating agencies, namely Standard & Poor’s, Moody’s, and Fitch, in 2020 took 124 rating downgrades to 53 countries. They also revised the outlook to negative by 133 times in 63 countries.
Entering 2021, rating agencies still often lower their credit ratings and revise the outlook to negative. As of November 2021, rating agencies have taken 39 rating downgrades in 26 countries and 21 revised outlooks to negative in 17 countries. This indicates that although the economic recovery has begun, uncertainty remains high.
Indonesia’s economy
However, in November 2021, good news came for Indonesia. rating agency Fitch Rating maintains Indonesia’s credit rating at BBB outlook stable. This is a very extraordinary achievement for Indonesia in the midst of the pandemic situation that is still hitting.
The Fitch rating agency assesses that Indonesia’s economic activity has recovered gradually from the pressures of Covid-19. This is also supported by policies for handling the pandemic. The pandemic handling is getting better by accelerating the vaccination.
Quoted from the official vaccination page of the Indonesian government, as of January 16, 2022, the phase 1 vaccine has reached a percentage of 77.28% of the population. As for the phase 2 vaccine, it has reached 54.51% of the population
It will grow in 2022
Fitch estimates that the Indonesian economy will recover and grow by 3.2% in 2021 and 6.8% in 2022. However, Fitch assesses that the risk of the evolution of the pandemic has the potential to become a new problem. This is also a challenge for the Indonesian government in the future.
Nevertheless, Fitch believes that economic growth will be consistent at around 6%. This economic growth will be supported by optimal handling of the Covid-19 pandemic and the implementation of the Job Creation Act which aims to reduce investment barriers.
On the other hand, foreign investment began to grow. This is also one of the factors that strengthen the Indonesian economy. Foreign investment has recently been focused on several sectors, one of which is the production of electric vehicles.
Fitch reminded Indonesia to remain cautious about shifts in investor sentiment towards emerging markets. This is due to the high dependence on portfolio inflows and commodity exports.
According to the Ministry of Finance, the rating agency’s decision to maintain Indonesia’s credit rating is an acknowledgment of Indonesia’s macroeconomic stability and medium-term prospects which are maintained amidst the Covid-19 pandemic situation. This is supported by the excellent performance of the State Budget, as a responsive and anticipatory fiscal instrument in a still dynamic situation.
