TEMPO.CO, Jakarta - The international credit rating agency Moody's downgraded the Indonesian government's debt outlook from stable to negative on February 5, 2026. However, Indonesia's sovereign credit rating remains at Baa2, which is one level above investment grade.
According to its official statement, Moody's indicated that the change in outlook was driven by policy uncertainty, which poses a risk to policy effectiveness and suggests weakened governance. In its assessment, Moody's highlighted a fiscal deficit amid rising expenditures and a narrow revenue base.
The pressure is further exacerbated by the expansion of social programs, including the Free Nutritious Meal (MBG) and People's Housing initiatives. These programs are being funded through budget cuts and priority reallocations across various ministries, including infrastructure maintenance budgets.
Further expansion may burden the government's ability to redirect a budget that is relatively small compared to the size of the economy, according to Moody's in its written report on Thursday, February 5, 2026.
In addition, Moody's highlighted the formation of Danantara, which is seen as increasing uncertainty regarding financing, policies, and investment priorities. This is particularly significant as Danantara manages state-owned enterprise (SOE) assets exceeding US$900 billion, or roughly 60 percent of the nominal Gross Domestic Product (GDP) in 2025.
In response, the Ministry of Finance stated that the government acknowledges Moody's assessment, which maintains Indonesia's credit rating at Baa2 despite the outlook adjustment from stable to negative. "The government continues to transform the economy and revitalize all engines of economic growth," the official statement read on Thursday, February 5, 2026.
The government ensures that fiscal risks remain controlled by continuously implementing breakthroughs to address business obstacles (debottlenecking). Furthermore, the government, in coordination with Bank Indonesia, remains committed to maintaining price and exchange rate stability, as well as financial market stability.
On the other hand, the government believes that signs of economic improvement have been evident since the second half of 2025, supported by various strengthening indicators. This was further confirmed by the fourth-quarter 2025 economic growth performance of 5.39 percent, which exceeded market expectations.
The government remains optimistic that economic growth will continue to improve through a commitment to better economic management. This outlook is supported by robust household consumption and increased investment across various sectors as indicators of rising investor confidence in Indonesia.
Fiscal synergy and Danantara will be optimized moving forward. With this commitment, the government remains optimistic about accelerating higher economic growth.
Read: Indonesia Records 5.11% Economic Growth in 2025, Falls Short of Govt Target
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