Jakarta. The Alliance of Indonesian Economists (AEI) on Wednesday urged the government to treat Moody’s Ratings’ decision to revise Indonesia’s sovereign outlook from stable to negative as a serious warning, particularly over concerns about governance and policy consistency.

Bernardus Marcello Agieus, an economist at AEI, said the key message from Moody’s lies in its focus on reducing fragility and improving coherence in policymaking and communication.

“What deserves close attention is how Moody’s explicitly mentioned reduced predictability and coherence in policymaking alongside policy communication,” Bernardus said at The Forum B-Universe Media Holdings event at Hotel Mulia Senayan in Jakarta on Wednesday.

He said Indonesia’s economic growth of 5.39 percent in the fourth quarter of 2025, which exceeded expectations, has not been sufficient to anchor the confidence of rating agencies. Beyond macroeconomic performance, he said, Indonesia must demonstrate political stability, bureaucratic stability and strong technocratic leadership.

Bernardus also highlighted ongoing state-owned enterprise (SOE) restructuring and the establishment of Danantara, the government’s sovereign investment body. While supporting efforts to streamline bureaucracy, AEI stressed that reforms must be accompanied by the implementation of good governance and sound corporate governance principles.

Moody’s cited several factors behind its decision to revise the outlook to negative, pointing to reduced policy predictability amid shifting communication and direction that could weaken investor confidence. The agency also flagged concerns over the fiscal impact of large-scale programs, including the free nutritious meals initiative (MBG) and subsidized housing, warning that they could widen the budget deficit given Indonesia’s relatively low tax revenue base.

In addition, Moody’s highlighted uncertainty surrounding the governance framework and contingent liabilities of Danantara, cautioning that debt linked to state-owned enterprises could ultimately add pressure to the government’s balance sheet if not managed prudently.

AEI economist Dipo Satria Ramli said that key points raised by Moody’s relate directly to governance issues. 

“Two out of the three are about governance,” Dipo said at the same event.

He described Moody’s move as an early warning signal. Although it does not constitute a downgrade, the outlook revision should prompt the government to address governance concerns that may not yet convince markets.

Dipo cautioned that a change in outlook — and the potential risk of a downgrade — could affect capital flows, particularly from passive investors tracking global bond indices. A sovereign downgrade, he said, would likely have broader implications for borrowing costs across the economy.

“If the sovereign rating falls, government risk rises. If the government has to pay higher interest, banks will follow, corporations will follow, SMEs will follow, and ultimately households will be affected. That could put pressure on the overall economy,” Dipo said.

Bernardus added that Moody’s decision could serve as a leading signal before other rating agencies, such as S&P Global Ratings, announce their positions. He said the situation should be anticipated carefully by policymakers.

AEI concluded that the government needs to respond with concrete steps to strengthen governance, ensure policy consistency and reinforce institutional stability in order to maintain market confidence and safeguard national economic stability.