Credit ratings agency S&P has reaffirmed Indonesia’s current sovereign credit ratings, maintaining a “stable” outlook for the country’s economy. The agency confirmed its BBB/A-2 ratings, suggesting that the recent fiscal strains experienced by the nation—including high energy prices, elevated interest rates, a weak currency, policy uncertainties, and accumulated debt—are likely temporary. According to S&P, government initiatives to boost revenue and export earnings from the resource sector are expected to improve the country's financial position over time, supporting the stable outlook.
This affirmation provides a reprieve for the administration of President Prabowo, which has faced significant friction with international investors since taking office in October 2024. Prabowo’s focus on high-spending populist measures, such as a multibillion-dollar free meal program, has pushed the national budget toward its 3 percent annual deficit limit. Furthermore, the administration's decision to fire respected Finance Minister Sri Mulyani Indrawati last year, coupled with increased state intervention in the economy, has unsettled markets and challenged Indonesia's reputation for fiscal conservatism.
Other rating agencies have previously expressed concern regarding these policies. Earlier this year, both Moody’s and Fitch downgraded their debt rating outlooks for Indonesia to negative, citing the unpredictable nature of the country's economic management and the centralization of authority under the current administration. The Indonesian stock market has also struggled; the MSCI index provider threatened to downgrade the country to “frontier market” status in January due to transparency concerns and low free float shares. While the government has since proposed reforms, including doubling the minimum free float to 15 percent and replacing top exchange executives, the MSCI has only extended its review until November. Consequently, the main Indonesian stock index remains among the worst-performing in Asia for 2026.
Currency volatility remains a point of concern, with the rupiah currently trading at more than 18,000 to the U.S. dollar, a decline from the 15,500 rate observed during Prabowo’s inauguration. This valuation is lower than the levels seen during the 1997-1998 Asian financial crisis. Despite these headwinds, S&P expressed confidence that the government continues to view its 3 percent deficit ceiling as a vital policy anchor, noting recent pledges to cut spending on programs like the Free Nutritious Meals initiative to stay within that threshold. In response, the Indonesian government and Bank Indonesia stated that the rating reflects global investor confidence in the nation’s economic management.
