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|14 March, 2019

Indonesia elections unlikely to drive major economic policy change: Fitch

Fitch forecast Indonesia's economic growth would slow a touch to 5.0% this year from 5.2% in 2018 due to sluggish exports and cooling global demand

JAKARTA - Indonesia's upcoming elections are not expected to trigger significant changes in economic policy, Fitch Ratings said on Thursday, as it reaffirmed the country's credit rating at 'BBB' with a stable outlook.

"There is little indication in Fitch's view that the presidential and parliamentary elections on 17 April 2019 will lead to major changes in the direction of economic policy," Fitch said in a statement.

Fitch forecast Indonesia's economic growth would slow a touch to 5.0 percent this year from 5.2 percent in 2018 due to sluggish exports and cooling global demand.

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Indonesia has remained dependent on foreign portfolio financing and still struggles to attract foreign direct investment despite reform efforts in recent years.

Southeast Asia's biggest economy, however, reduced its fiscal deficit to 1.8 percent of GDP in 2018 from 2.3 percent a year earlier on the back of stronger revenue from the commodity sector and higher tax collection.

Fitch noted that improving revenue streams, higher foreign-exchange reserves, diversification away from commodities and reduced dependence on volatile portfolio flows "could trigger positive rating action".

On the other hand, Fitch warned that a weakening of the policy framework could undermine macroeconomic stability.

Both presidential candidates, the incumbent Joko Widodo and his challenger, Prabowo Subianto, have pledged to boost the economy and cut taxes. L3N1ZV2R8

Bank Indonesia said Fitch's affirmation indicated confidence in Indonesia's economy and its external resilience amid ongoing economic uncertainties, noting that the central bank will "consistently implement policy mix to strengthen external stability and boost economic growth momentum" with the government and other authorities.

(Reporting by Tabita Diela; Editing by Ed Davies and Nick Macfie) ((tabita.diela@thomsonreuters.com; +628561539032;))

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