Goldman Sachs lowered Indonesia’s stock ranking, fiscal deficit in the main highlight

According to Economic Observer from Andalas University, Syafruddin Karimi, Goldman Sachs’s decision reflects the uncertainty of investors towards government fiscal policies. “Budget efficiency and formation and between two key factors pay attention to investors. If it is not carried out with strong transparency and fiscal discipline, market confidence will decrease, “Syafruddin explained when contacted on Tuesday, March 11, 2025.

Syafruddin also warned that this decline in ranking could trigger an increase in the yield of state debt (SUN). “Investors will ask for a higher risk premium, which means the government must pay more interest to withdraw funds from the market,” he said.

APBN deficit projection and its impact

Goldman Sachs projects that the Indonesian state budget deficit will widen up to a maximum limit of 2.9% in 2025. In addition to reducing stock rankings, this institution also reduces the ranking of state bonds with 10 and 20 years of tenor to neutral.

Previously, another global financial institution, Morgan Stanley, had also reduced Indonesia’s shares in the MSCI index from equal-weight the underweight. This decision further worsens investor sentiment towards the Indonesian financial markets.

Impact on the capital market and rupiah exchange rate

The decline in ranking by the two prominent financial institutions is feared to trigger an outgoing capital flow (capital outflow) From Indonesia. Global investors tend to divert their funds to countries with better economic stability and more promising growth prospects.

Syafruddin explained, “Institutional investors referring to the global index will do rebalancing Portfolio by reducing exposure to Indonesian assets. This can reduce liquidity in the stock market and bonds, and increase the volatility of asset prices. ”

He also added, if the capital flow outflow is getting bigger, Bank Indonesia (BI) may have to increase intervention to maintain the stability of the rupiah exchange rate and prevent further shocks on the financial system.

Challenges for long -term investors

This decline in ranking not only has a short -term impact, but can also reduce Indonesia’s attractiveness for long -term investors. Without a credible fiscal policy and consistent structural reform, investors will prefer a country with better macroeconomic stability.

“Indonesia needs to build investor confidence by increasing transparency and fiscal discipline. Without it, it is difficult to withdraw the interest of global investors, “said Syafruddin.