According to R&I, several key factors support this decision, encompassing Indonesia's robust economic performance and its resilience amid global economic uncertainty, achievement of inflation and fiscal deficit within the targeted range earlier than expected, maintained financial stability, and declining trend in government debt ratio.

In response to the decision, Governor of Bank Indonesia, Perry Warjiyo, expressed his appreciation for the improved outlook of the Republic of Indonesia. “The improvement of the Republic of Indonesia's outlook reflects strong confidence of international stakeholders on Indonesia's sustained macroeconomic stability and promising medium-term economic prospect, amid global economic and financial uncertainty. The positive development is further bolstered by high policy credibility and effective policy synergy between Bank Indonesia and the Government. Going forward, Bank Indonesia remains committed to closely monitoring global and domestic economic and financial developments. Thus, Bank Indonesia will also continue to formulate and execute necessary policy measures to ensure macroeconomic and financial stability, and strengthen synergy with the Government to accelerate economic transformation towards a more inclusive and sustainable economy."

R&I has mentioned that Indonesia's economy is expected to remain solid in 2023, despite a projected softer pace of growth in the second half of the year. The government has set a real GDP growth target for 2023 in the range of 5.0% - 5.3%. The government's efforts to improve the business environment, develop infrastructure, and strengthen human capital will be the essential factors in achieving its medium-to-long term growth target. R&I believes that Indonesia's real GDP will grow at the pace of 5% range from 2024 onwards. R&I also expresses confidence that the price stability will be maintained, supported by Bank Indonesia's monetary policy discipline and its strengthened synergy with the Government, notably through the activities of inflation control team. On the external front, Indonesia recorded current account surpluses in 2021 and 2022, reflecting an improvement of the terms of trade supported by higher commodity prices. However, R&I projects that the current account balance is likely to shift into a deficit in the coming years. Nevertheless, this deficit is expected to remain at a manageable level, thus supporting Indonesia's external resilience.

From the fiscal perspective, the government's strong commitment to fiscal consolidation has resulted in a less-than 3% deficit target a year earlier than planned. R&I anticipates that in 2023, revenues will remain robust, while expenditures will be well-controlled in line with the planned objectives. Given that, the government has lowered its budget deficit forecast for 2023 to 2.3% from the initial target of 2.8%, leading to lower government debt-to-GDP ratio.

On July 4, 2022, R&I affirmed Indonesia's Sovereign Credit Rating at BBB+ with a stable outlook, indicating a rating two levels above the lowest of investment grade.

Jakarta, 25th  July 2023

Head of Communication Department