Jakarta: Indonesian financial markets faced renewed turbulence on Friday after global ratings agency Moody’s Investors Service cut the country’s sovereign credit outlook from stable to negative, intensifying pressure on stocks, bonds and the rupiah around the region. Analysts said the move added to existing investor fears about policy direction and governance in Southeast Asia’s largest economy.
The Jakarta Composite Index (JCI) opened sharply lower, slipping more than 2 %, as risk sentiment weakened following Moody’s announcement. The broader sell-off continued from earlier in the week, extending losses triggered by a separate warning from MSCI over data transparency issues that prompted a rout exceeding US$80 billion in market value.
The Indonesian rupiah also came under strain, edging toward levels not seen since late January against the U.S. dollar, reflecting heightened anxiety over currency stability and monetary policy autonomy. Meanwhile, longer-dated sovereign bonds saw price declines, with some trading near their weakest levels in months, underscoring investor caution on longer-term risk.
Moody’s maintained Indonesia’s Baa2 investment-grade rating but flagged reduced predictability in policymaking, weakening governance and policy effectiveness concerns as core reasons for the outlook change. The agency cited these trends as potential threats to the country’s hard-earned macroeconomic credibility if they persist.
Moody’s move comes on the heels of mounting investor unease after MSCI raised transparency concerns that shook confidence in Indonesia’s equity markets. The twin developments have stoked fears that other ratings agencies might follow Moody’s lead if governance and policy clarity do not improve.
Market analysts say that the revision to a negative outlook could increase risk premiums across asset classes, placing additional stress particularly on government bonds, major banks’ shares and state-owned enterprises. Foreign investors have continued to trim holdings, adding to net outflows recorded in recent weeks.
Indonesian officials have sought to temper market concerns. Chief Economic Minister Airlangga Hartarto described Moody’s action as a misunderstanding of Jakarta’s growth strategy, urging caution in interpreting the outlook adjustment.
Similarly, Bank Indonesia’s Governor Perry Warjiyo emphasized that the negative outlook does not reflect a deterioration of core economic fundamentals. In comments reported separately, he highlighted Indonesia’s steady growth trajectory including a 5.1 % expansion in 2025 and underscored the central bank’s commitment to macroeconomic stability despite external pressures.
The current market environment reflects deeper concerns over Indonesia’s fiscal management, an expanding deficit driven by growth-oriented spending and questions over central bank independence under President Prabowo Subianto’s leadership. Analysts warn that without clear governance reforms and stronger policy coherence, Indonesia could face additional credit scrutiny in the months ahead.
While Moody’s still affirms the country’s investment-grade status, the negative outlook signals that the next move could be a rating cut if key risks are not addressed. Market participants will be watching Jakarta’s policy responses closely in the coming weeks as confidence restoration efforts continue.