Elections, oil, currency volatility and SOE spending dominant credit themes for Indonesia in 2019: S&P

November 20, 2018

JAKARTA - Indonesia's economic growth is unlikely to accelerate much beyond 5% in 2019, given the election period, higher interest rates, and possible price hikes after the election, according to ratings agency Standard and Poor's.

S&P describes the Government's moderate debt levels and contained fiscal deficit as key supporting factors amid external volatility.
"Continuing price controls, and soft consumer sentiment ahead of the April 2019 polls will mostly affect the real estate and SOE sectors," it says.
"Rupiah depreciation appears to be a contained risk for corporate credit quality, in part because many borrowers are commodity producers with a natural hedge.
"That said, we estimate that credit risks are building for nearly US$15 billion in mismatched debt for listed companies in the real estate, transportation and manufacturing sectors.
 "Willingness to pay and the extent of mismatched debt at complex groups or unlisted parents remain question marks."
S&P says commodity producers could face more challenges after two stellar years of performance.
 It believes large Indonesian banks have sufficient capital buffers and margins to deal with the second-order impact of rupiah depreciation.  www.standardandpoors.com (ATI).