Striking back: Indonesia offers an alternative to other large Ems

The borrower’s gradually improving risk profile could see it overtake Brazil and Turkey before too long.

  • By Jeremy Weltman
  • 27 Mar 2017
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Indonesia ECR 2017

Split-decision: Indonesia is an investment-grade winner by two to one, with the S&P judge failing to agree with Fitch and Moody’s

It seems a long time since the taper tantrum led to Indonesia being classified as one of the fragile five emerging markets (EMs) – alongside Brazil, India, Turkey and South Africa – with its falling risk score plunging the sovereign down seven places in the global risk rankings.

Since then, Brazil’s fall from grace has spectacularly narrowed the risk differential between the two EMs, and Turkey’s slide is well-documented, but Indonesia’s steady improvement should not be overlooked:

Indonesia 2 ECR 2017

Preliminary data show Indonesia’s score continuing to rise in Q1 2017 and, ranking 64th out of 186 countries surveyed, it could soon sail past Brazil and Turkey, leaving the two EMs trailing behind.

Indonesia has proved highly resilient to external shocks, maintaining a strong 5% real GDP growth rate.

The fiscal deficit has been kept to 2.5% of GDP, limiting debt accumulation, and with a 2% of GDP current-account deficit, and inflation falling within the central bank’s 3% to 5% target thanks to stability of the rupiah exchange rate, it is no wonder the economic risk factor scores have all improved.

Scores for the GNP-economic outlook and government finances vastly exceed those for Brazil and Turkey, with others not far behind.

Credit rating scores are similarly higher, signalling S&P should consider matching Fitch and Moody’s by awarding Indonesia an investment grade, just as the government’s coordinating minister Darmin Nasution claims.

That’s not to say there are no risks. Indonesia is still a lowly ranking tier-three sovereign with political risk factor scores that are weaker than those for Brazil or Turkey.

Importantly, however, the gap has narrowed, with Brazilian and Turkish experts downgrading, and Indonesian president Joko Widodo improving his position by strengthening political alliances and gaining from the success of his tax reform amnesty beating its target, with $330 billion-worth of assets declared.

There are still larger reforms to embark on, overcoming vested interests, and socio-religious concerns. Yet the president’s achievements and his positive communication style mean his approval rating has reached 66%, with more than 80% believing the country is on the right path, according to Indo Barometer.

ECR contributor and ABN Amro senior economist Arjen van Dijkhuizen notes the fact Indonesia has shown considerable resilience to several external shocks, including the sharp fall in commodity prices, weak global trade and market volatility leading to capital outflows.

 “[Economic] growth has been stable around 5% despite various shocks, the reform momentum has improved, the macro policy mix is supportive and external risks have fallen,” he says.

“Indonesia has graduated from the category of most fragile EMs.”


This article was originally published by ECR. To find out more, register for a free trial at Euromoney Country Risk.

  • By Jeremy Weltman
  • 27 Mar 2017

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 13 Mar 2017
1 JPMorgan 94,925.33 384 8.39%
2 Citi 87,531.58 331 7.74%
3 Bank of America Merrill Lynch 84,341.49 288 7.46%
4 Barclays 75,288.19 241 6.66%
5 Goldman Sachs 68,504.71 208 6.06%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 14 Mar 2017
1 Bank of America Merrill Lynch 10,650.87 23 11.13%
2 Deutsche Bank 8,169.49 17 8.53%
3 HSBC 6,243.46 23 6.52%
4 Citi 4,355.35 13 4.55%
5 SG Corporate & Investment Banking 4,273.37 17 4.46%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Apr 2017
1 JPMorgan 6,719.07 26 8.43%
2 Deutsche Bank 5,994.13 30 7.52%
3 UBS 5,678.69 26 7.12%
4 Citi 4,920.31 35 6.17%
5 Goldman Sachs 4,802.16 24 6.02%