Indonesia gets rating increase to 13-year peak

Moody's Investors Service gave Indonesia another nudge toward investment grade by raising the nation's sovereign rating, taking into account the economy's ability to weather the downturn, its manageable debt load and rising investment from overseas.

The state's foreign- and local-currency bond rating were lifted from Ba2 to Ba1, just beneath the A investment grade. Greece also has a Ba1 rating after being downgraded, and faces further cuts by Moody's. This is the highest rating for Indonesia since the 1997 fiscal crisis.

"We have upgraded the sovereign credit ratings as momentum in the economy is expected to be sustained by steady domestic demand, a reasonable pace and sequencing of policy and structural reforms, and rising foreign direct investment," said Aninda Mitra, a vice president at Moody's. "Furthermore, the country's debt position and reserve adequacy remain on an improving trajectory relative to most of its ratings peers."

The economy is poised to grow as much as 6.5 percent this year from an estimated 6 percent in 2010, according to Bank Indonesia forecasts. The country's debt-to-GDP ratio has declined steadily over the past five years, falling to 27 percent at the end of 2010 from 40.8 percent in 2006, making it the only G-20 member with a declining debt-to-GDP ratio.

Government officials welcomed Moody's move, saying it would lift the entire economy. "This upgrade will bolster investor confidence, particularly foreigners, to stay in Indonesia. It will also improve foreign direct investment," said Rahmat Waluyanto, chief of debt management at the Finance Ministry