Moody's warns of downside risks for Indonesia's economy from populist policies and narrow tax base

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โดย Kaohoon·Read original
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Moody's Ratings has issued a warning about downside risks for Indonesia's economy amid policy uncertainty under President Prabowo Subianto. It noted that the establishment of PT Danantara Sumberdaya Indonesia, a new agency overseeing raw material exports, has an unclear scope of authority, raising concerns that the government may intervene excessively in the private sector. Meanwhile, the free lunch program and rising energy subsidy burdens are eroding fiscal space, as Indonesia has a narrow tax revenue base. Martin Petch, Moody's Vice President for Country Risk, said there are no signs yet of sufficient revenue base expansion, and if the government does not generate new revenue, the budget deficit could exceed the legally mandated limit. These concerns have led to heavy selling of Indonesian assets, making them the worst performers in the region. Although S&P Global Ratings still maintains an investment-grade rating with a stable outlook, the government has begun trimming the lunch program budget and accelerating budget reviews to find savings. Global financial markets will be watching foreign exchange reserves and fiscal discipline over the next six to twelve months.

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