Indonesia's Economic Jitters: Moody's Downgrade Sparks Market Turmoil

Moody's has downgraded Indonesia's credit rating outlook to negative, causing further market instability. This decision highlights concerns about policy effectiveness and governance, potentially impacting the nation's economic credibility. Despite reassurances from local officials, investor skepticism remains high, with fears of increased risk premiums affecting currency and asset values.

Indonesia's financial markets may face increased volatility on Friday following Moody's downgrade of the nation's credit rating outlook. The global ratings agency cited concerns over policy effectiveness and weakening governance as key reasons for the outlook shift from stable to negative.

Despite reassurances from Indonesia's chief economic minister about the resilience of the nation's economic fundamentals, the downgrade has sparked fears of a heightened risk premium. Market analysts warn of pressure on government bonds, state-owned enterprises, and banks, alongside ongoing scrutiny of the rupiah's performance.

The downgrade comes amid broader market unrest driven by policy uncertainty under President Prabowo Subianto, contributing to significant outflows and a further dip in stock market indices, thereby spotlighting the critical need for credible policy measures.

(With inputs from agencies.)