Moody's Investor Services has upgraded Indonesia's ratings outlook from "stable" to "positive," after the government successfully negotiated the rescheduling of $5.4 billion debt. But economists say Indonesia still has a long way to go before it reaches financial recovery.
Analysts say the upgrading of Indonesia's outlook is a step in the right direction for a country desperate to attract foreign investment. But they say there is still a lot of work to be done before previous investors return in large numbers and new investors come in.
Anton Gunawan is an analyst with Citibank in Jakarta. "Ratings changes have some effect but [are] not that significant. That only changes the perception. The main thing that Indonesia has to do is speeding up the reforms - legal reforms and governance on the private sector, on the companies. The corporate sector restructuring is a must. Otherwise we will still be growing like this three to four percent, and [we] cannot achieve more than six percent, which is needed for Indonesia, I think," he said. Indonesia's national currency, the rupiah, did not strengthen on news of the upgrade. But that's likely because it strengthened earlier this month, when the Indonesian government struck a deal with foreign creditors to reschedule $5.1 billion of debt.
The Paris Club group of foreign creditors will now let Indonesia pay $2.7 billion by December 2003 - instead of the $7.5 billion originally due.
Indonesia's economy has been mired in problems since the onset of the Asian financial crisis in 1997, when the rupiah collapsed. The International Monetary Fund has provided Indonesia with a multi-billion dollar bailout program to save the country from further political turmoil.
Analysts say Moody's upgrade of Indonesia's outlook is likely to be followed by an upgrade of the country's B-3 credit rating in the coming weeks.