Moody's Credit Outlook Downgrade Rattles Indonesia's Economy

Indonesia's stocks and currency plunged after Moody's downgraded the nation's credit outlook, erasing $120 billion from its equity market. Concerns over fiscal health and governance have sparked negative sentiment, despite government assurances of strong economic fundamentals and growth prospects. The downgrade hints at anticipated policy challenges.

Indonesia's financial markets took a hit on Friday as Moody's downgraded the country's credit rating outlook. This move triggered a loss of about $120 billion from the equity market and highlighted concerns about fiscal policy and governance in Southeast Asia's largest economy.

Despite the downturn, Finance Minister Purbaya Yudhi Sadewa emphasized the strength of Indonesia's economic fundamentals, assuring that fiscal health remains intact. The downgrade, however, indicates potential challenges ahead in policy coordination and governance.

International investors have been skeptical, particularly about the independence of the central bank and Prabowo Subianto's growth strategies. Analysts warn that continued instability could lead to further downgrades from other rating agencies if not addressed.

(With inputs from agencies.)