MARKET DEVELOPMENT
Moody's Maintains Stable Outlook for Indonesian Companies
Moody's Maintains Stable Outlook for Indonesian Companies
23/11/2016 (Jakarta Globe) - Global rating agency Moody's Investors Service has maintained a stable outlook for credit quality of non-financial corporations in Indonesia as it expects their profits to grow modestly, thanks to the expected acceleration in infrastructure investment in the country and recovering global commodity prices.
In a report unveiled on Monday (22/11), Moody's said it projected Indonesia's economy to grow by 5.2 percent in 2017, supporting corporate earnings growth of between 2 percent and 6 percent.
"[The] government reform agenda and increased infrastructure investment [is expected] to drive demand in the construction, building materials and heavy equipment sectors," the report, prepared by Gary Lau, Laura Acres, Brian Cahill and Chris Park, stated.
The report also said consumer spending on property, cars, motorcycles and other durable goods was likely to rebound off a subdued 2016.
On commodity prices, the report said coal, oil and gas, and palm oil are likely to remain above their 2016 lows.
Moody's said Indonesia is less vulnerable to the risk of protectionist economic policies, with the country's exports making up less than 20 percent of its gross domestic product in 2015.
This is relatively lower compared to its Southeast Asian rivals such as Thailand, Vietnam, Singapore, Malaysia and the Philippines, whose exports-to-GDP ratio stood at more than 20 percent.
However, Moody's also cited some possible negative factors for Indonesia next year, saying corporate refinancing was likely to pose challenges from the expected interest rate increase by the United States Federal Reserve, and a further slowdown in China's economy, which will cause volatility in the rupiah exchange rate.
In a report unveiled on Monday (22/11), Moody's said it projected Indonesia's economy to grow by 5.2 percent in 2017, supporting corporate earnings growth of between 2 percent and 6 percent.
"[The] government reform agenda and increased infrastructure investment [is expected] to drive demand in the construction, building materials and heavy equipment sectors," the report, prepared by Gary Lau, Laura Acres, Brian Cahill and Chris Park, stated.
The report also said consumer spending on property, cars, motorcycles and other durable goods was likely to rebound off a subdued 2016.
On commodity prices, the report said coal, oil and gas, and palm oil are likely to remain above their 2016 lows.
Moody's said Indonesia is less vulnerable to the risk of protectionist economic policies, with the country's exports making up less than 20 percent of its gross domestic product in 2015.
This is relatively lower compared to its Southeast Asian rivals such as Thailand, Vietnam, Singapore, Malaysia and the Philippines, whose exports-to-GDP ratio stood at more than 20 percent.
However, Moody's also cited some possible negative factors for Indonesia next year, saying corporate refinancing was likely to pose challenges from the expected interest rate increase by the United States Federal Reserve, and a further slowdown in China's economy, which will cause volatility in the rupiah exchange rate.