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Fiscal Policy Encourages Investment for the Improvement of the National Economy

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A flexible fiscal policy in responding to the turmoil of the Covid-19 pandemic seems to be able to mitigate the impact and encourage acceleration of economic recovery. This policy is also expected to attract investors to Indonesia.

Government policies that are credible and effective in maintaining macroeconomic stability have apparently made Standard and Poor’s as an economic rating agency maintain Indonesia’s investment grade rating and revise its outlook from negative to stable. This outlook improvement is expected to make Indonesia a country that is ready to compete in financing withdrawals.

Standard and Poor’s (S&P) revised Indonesia’s debt rating from BBB/negative outlook to BBB/stable outlook on April 28, 2022. Thus, Indonesia has received a BBB or BAA2 rating with a stable outlook from three world rating agencies, namely Fitch Rating, Moody’s and S&P. Meanwhile, Indonesia’s debt rating from JCRA and R&I is recorded at a higher level, namely BBB+/stable outlook.

In terms of securities rating agencies, a BBB or BAA2 rating means that the securities issued by the Government of Indonesia are of medium grade. The stable projection describes a rating position that will be stable in the future while showing a balanced risk.

The Directorate General of Financing and Risk Management at the Ministry of Finance Luky Alfirman hopes that Indonesia’s credit rating at BBB Position can bring fresh air to the Indonesian economy going forward, especially in encouraging economic growth which was affected by the Covid-19 pandemic.

On the other hand, the improvement in Indonesia’s outlook to stable is an acknowledgment of the strong direction of macroeconomic improvement, particularly the relatively fast pace of economic recovery and the significant strengthening of the fiscal side.

When several countries faced downgrades, Indonesia was able to maintain its investment grade rating and improve its outlook from negative to stable. Of course, Indonesia’s rating and outlook are believed to be a magnet for attracting investment in the future.

We need to know that Indonesia is rated as the 4th favorite country in Southeast Asia which is most favored by companies from the United States and Europe for opportunities to build or expand company resources, sales or operations over the next six to twelve months.

Standard Chartered has conducted a survey of more than 1000 Chief Financial Officers (CFOs) and senior financial professionals in companies with a turnover of over USD 500 million. The study revealed that 42% of US and European companies see the greatest growth potential in overseas markets.

Coordinator for Economic Affairs Airlangga Hartarto said the government would continue to encourage the ease of investing in Indonesia through improving the ease of doing business system. He believes that increasing confidence in cross-border growth can be used as a momentum to increase optimism and awareness regarding the reforms that have been carried out by the Government of Indonesia to support the ease of doing business through Law Number 11 of 2020 concerning Job Creation.

The government will also continue to encourage promotions related to the ease of investing in Indonesia by prioritizing the issue of investment and sustainable development. Digitalization will also have an important role in investment by prioritizing the competitive advantage of investment opportunities in the country. In addition, the Indonesia Investment Authority (INA) also opens investment opportunities, especially related to infrastructure projects to support Indonesia’s more sustainable development.

One of the Indonesian government programs that is currently considered to be an attraction for investors, namely the development of industrial human resources (HR) competencies through vocational education and training programs. This program will of course produce human resources who are ready to work, so that investors are increasingly interested in investing in Indonesia. Of course, Indonesia’s economic rating can still experience an increase, especially with economic conditions that are increasingly showing strengthening.

Investment is the driving force of the economy in Indonesia, so it is very important for Indonesia to continue to strive to maintain political and economic stability so that investors become interested in investing in Indonesia. Thus, it is not impossible that Indonesia will become a country that gets out of the middle income trap and becomes a developed country.

)* The author is a contributor to the Press Circle and Cikini Students

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