Meanwhile, the rupiah fell as much as 0.3% to 16,885.
While Moody’s reaffirmed Indonesia’s Baa2 rating, the outlook cut from stable indicates that the rating may be downgraded if the government doesn’t take sufficient steps to address fiscal pressures, a weakening in foreign reserves and debt concerns related to state-owned firms, it said in a statement on Thursday.
The outlook cut came just a week after index provider MSCI Inc warned that Indonesia could be downgraded to frontier status because of a lack of liquidity and transparency in the stock market, triggering a massive equities sell-off. It underscores the challenges President Prabowo Subianto’s administration faces as it tries to restore market confidence.
See also: As market shifts, remisiers rally to ‘regroup, reskill and rebound’
Policymakers rushed to respond on Thursday. Bank Indonesia governor Perry Warjiyo said in a statement that the outlook downgrade “does not reflect any weakening in Indonesia’s economic fundamentals”. The Finance Ministry pledged to continue to transform the economy and revive growth engines while ensuring that “every potential risk will be properly managed”.
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