By: Prof. Dr. Perdana Wahyu Santosa MOODY’S did not downgrade Indonesia’s rating. Reuters reported that what was cut was the outlook: from stable to negative, while the long-term debt rating remains at Baa2 (still investment grade). But do not underestimate the word “outlook”. In the market, it works like a yellow light: no accident yet, but drivers are asked to reduce speed because the curve ahead is no longer easy to predict.
In a Kontan article, Moody’s mentioned that the root of the problem is not a lack of resources or a sudden economic downturn, but rather declining policy predictability that risks weakening policy effectiveness and governance quality. If this pattern continues, policy credibility—which has long been the “anchor” for macroeconomic, fiscal, and financial system stability—could be eroded.
At this juncture, a healthy reading is two-layered: Indonesia maintains its foundation, but that foundation will be tested by how the state manages major policies—especially program financing, state revenue, and the design of new institutions like Danantara.
What is the Main Root of the Problem?
1) “Negative” means the market is starting to recalculate risk
Moody’s emphasized that the policy formulation process over the past year was assessed as less consistent and less coherent, compounded by ineffective policy communication. It was noted that this condition was reflected in market volatility and a decline in certain global governance indicator scores.
The market reaction then followed classic logic: risks perceived to be rising will demand higher premiums, particularly on long-duration assets (long-tenor bonds, large bank stocks, and SOEs). Reuters noted that the rupiah briefly weakened to around 16,880 per US Dollar and the JCI was pressured following the decision.
2) Fiscal tension: large spending, weak revenue base
Moody’s also highlighted the fiscal risks arising from the focus on public spending to drive growth—especially social programs—while the state revenue base is assessed as still weak. Efforts to improve tax and customs administration exist, but the track record of expanding the tax base is deemed insufficient to cover the growing spending ambitions.
This is not an ideological debate of “pro-spending” or “anti-spending”. This is a matter of the arithmetic of credibility: the market is calmer if it sees new spending paired with a clear, measurable revenue blueprint whose progress can be audited.
3) Danantara: a large institution, large questions
Kontan wrote that Moody’s highlighted the formation of the new sovereign wealth fund, Danantara, as a source of uncertainty regarding funding sources, governance, and investment priorities. It was also mentioned that the scale of SOE assets under its authority exceeds 900 billion US Dollars (around 60% of 2025 nominal GDP), so if coordination and governance are weak, potential contingent liabilities for the state could arise.
Moody’s also touched upon the authority related to SOE dividend policies—including state-owned banks—which, if too aggressive, could pressure the financial health of the SOEs.
4) ESG dimensions and social stability enter the radar
Kontan added the ESG dimension where environmental risks are rated high (climate, coastal flooding, disasters), while social risks are moderate, including issues of inequality and public dissatisfaction that trigger protests. This is important because rating agencies are increasingly incorporating non-financial risks as factors affecting credit profiles.
Strategic Recommendations
1) First key: predictability through a disciplined “communication package”
What is needed is not long speeches, but neat policy communication: objectives, instruments, schedules, success indicators, and correction mechanisms if targets are missed. Moody’s itself linked the issue to policy effectiveness and governance; the most effective answer is demonstrating a consistent—not reactive—policy process.
2) Pairing spending with measurable revenue reform
If the social agenda is expanded, then revenue reform must also “move up a class”: expanding the tax base, compliance, administrative improvements, and strengthening enforcement with clear annual targets. Kontan emphasized that the weak point lies in the revenue base; therefore, the strategy must show how every rupiah of spending has a “twin sibling” in the form of a credible financing plan.
3) Danantara must be readable to the global market
Danantara requires governance that can be read by institutional investors: investment mandates, risk limits, conflict of interest rules, SOE dividend policies based on balance sheet health, and transparent periodic reporting. The goal is simple: turning “uncertainty” into “rules of the game”. Kontan itself mentioned that Moody’s assumes there will be clarity over time; the policy task is to accelerate that clarity.
4) Maintain macro anchors: deficit discipline and policy coordination
Moody’s projects growth to hold at around 5% and the deficit to remain below 3% of GDP, with the government debt ratio being relatively lower than the median of Baa-rated countries, though constrained by the revenue base. This means the foundation is there—what needs to be maintained is policy consistency so that the foundation remains trusted.
Conclusion
A negative outlook is a warning, not a verdict. Moody’s still recognizes Indonesia’s economic resilience—backed by natural resources, demographics, as well as relatively prudent fiscal and monetary policies. However, the capital market and the bond market do not live on good intentions; they live on certainty that can be tested.
If the government is able to change three things—policy predictability, fiscal credibility through revenue strengthening, and transparent Danantara governance—then “negative” can return to “stable”. And more importantly: strong macro fundamentals will no longer be just a claim, but a track record read by the world without needing footnotes.
* The author is the Dean of FEB YARSI University, Research Director of GREAT Institute, and CEO of SAN Scientific. * This article was published on https://rmol.id/publika/read/2026/02/08/696664/outlook-moody-s-negatif-kredibilitas-kebijakan-diuji-di-pasar, Sunday, February 08, 2026, 22:58 WIB.
