18 January 2012 Last updated at 22:25 ET

Indonesia regains investment grade from second agency

Bringing in investment to build new infrastructure is one of the top priorities for the government

Indonesia has won a second credit rating upgrade in as many months, as Moody's ratings agency restored its debt to investment grade.

Moody's raised the rating to Ba1 from Baa3 with a stable outlook.

It comes after Fitch ratings agency made a decision in December to return Indonesia to the level it lost after the Asian financial crisis.

The stamps of approval are likely to bring much foreign investment into south east Asia's biggest economy.

Moody's attributed the decision to upgrade to Indonesia's success in shrinking its debt-to-gross domestic product ratio.

"Indonesia's cyclical resilience to large external shocks points to sustainably high trend growth over the medium term," said Moody's in a statement.

Analysis

Karishma Vaswani BBC News, Jakarta

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News of the ratings upgrade has been welcomed here, with officials saying it's a recognition of the fact that Indonesia is now a global financial "safe haven".

Indonesia lost its investment grade status after the Asian financial crisis, when it's economy virtually collapsed, the rupiah plummeted and there were concerns the archipelago would be torn apart by ethnic clashes. What a difference 14 years makes.

Today Indonesia is the darling of the foreign investment community. Many companies now say you cannot afford NOT to be in Indonesia. But it's not all good news.

Economists say for Indonesia's economy to keep growing, the government needs to fix some very basic problems - corruption, infrastructure and the bureaucracy.

All of these issues will be carefully watched by investors who want to come here. Indonesia has no time to lose - it has to capitalise on this positive momentum now.

"A more favourable assessment of Indonesia's economic strength is underpinned by gains in investment spending, improved prospects for infrastructure development following key policy reforms, and a well-managed financial system," it added.

Strong boost

The Indonesian central bank has applauded the move by the ratings agency saying it will greatly benefit the nation.

"A stable outlook will attract investors back to Indonesia not only in bonds and stock markets, but foreign direct investment will also increase," said Hartadi A. Sarwono, deputy governor of the Indonesian central bank.

The boost from Moody's was expected and will also decrease the country's borrowing costs to build infrastructure, something the current government has said the country is in dire need of.

Indonesia's credit rating is now at the same level as India's.