Fitch: Policy Agenda Key for Indonesia Rating After Jokowi Win

Thu Jul 24, 2014 12:14am EDT

(The following statement was released by the rating agency) HONG KONG/SINGAPORE, July 24 (Fitch) The official results for Indonesia's presidential election have confirmed earlier "quick counts" that former Jakarta governor Joko Widodo (Jokowi) has won by a margin of six percentage points (53% to 47%). The further build-up of Indonesia's democratic track record is credit supportive - assuming that the hand-over of power remains peaceful - says Fitch Ratings. Jokowi's opponent, Prabowo Subianto, has yet to formally concede defeat, but the official election results tabulated by the election commission confirm a margin of victory at the high end of initial estimates from exit polls. A peaceful conclusion of this electoral cycle in Indonesia, with the confirmation of a smooth handover, will end months of political uncertainty, and should be favourable for investment. Jokowi's coalition currently lacks a majority, with only 37% of the seats in parliament. Yet there is potential for the factions of some opposition parties to cross the floor. A broadening of parliamentary support for Jokowi, with one or more parties joining his coalition, would further strengthen the new government's mandate - and make it easier to implement the necessary reforms to boost productivity and lift the country's trend growth rate. Fitch maintains that the key issue for Indonesia's credit and sovereign rating over the next six to 12 months is the extent to which the government continues to prioritise economic stability over high GDP growth. Indonesia remains vulnerable to external pressures, and faces structural constraints to growth linked to an infrastructure backlog and business environment impediments to starting new businesses. Jokowi has built a reputation for starting new infrastructure projects in Jakarta, but has no track record at the national level. The next government's cabinet picks, budget and other potential policy pronouncements in the coming months will provide important indications as to how Jokowi will manage his political mandate - and the potential impact on the country's credit or rating. Contacts: Thomas Rookmaaker Director Sovereigns +852 2263 9891 Fitch (Hong Kong) Limited 2801, Tower Two, Lippo Centre 89 Queensway Hong Kong Justin Patrie Senior Director +65 6796 7232 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.