Jakarta. Indonesia is seen as more vulnerable to external-account destabilisation when compared to its regional peers India and the Philippines, international ratings agency Fitch Ratings said in a recent report.

Fitch, which upgraded Indonesia’s rating to investment grade in 2011 (BBB-, the lowest investment grade rating), highlighted that the country’s economic growth slowed to 4.7 percent year-on-year in the first quarter of 2015, which is the record lowest rate since the 2009 financial crisis.

The rating agency also noted that the Indonesian government continues to face challenges in dealing with slowing domestic economic growth caused by falling global prices. It is also struggling to boost infrastructure spending to help propel growth.

“Macroeconomic stability is more important than higher real GDP growth for maintaining Indonesia’s ‘BBB-’ rating,” Fitch said.

Meanwhile, India and the Philippines are experiencing improved business environments, which have led to higher investment opportunities for both countries, Fitch said.

Higher support for investment in India and the Philippines remains the main reason for higher levels of security when it comes to evaluating the effect of external accounts.

Fitch also warned that Indonesia could face external financing difficulties and a weaker investor confidence if the country fails to deal with the “sharp and sustained external shocks.”

The rating agency praised Indonesia’s central bank move to tighten its monetary policy to help reduce macroeconomic risks caused by investors’ speculation over the Federal Reserves’ tapering, which has led to jitters in the domestic financial market since 2013.

Fitch noted that the central bank has eased its monetary policy by cutting its key interest rate by 25 basis points in February 2015 to 7.5 percent to help spur growth.

However, further monetary easing amid the slow growth environment “is likely to be complicated by inflation levels that remain high and risks to external stability.”

Indonesia’s annual inflation rate accelerated to the highest pace in five-months in May due to rising food, tobacco and electricity prices ahead of the Muslim fasting month of Ramadan.

The consumer price index, a measure of inflation, increased by 7.15 percent year-on-year, data from the statistics bureau showed. That was the fastest pace since December’s 8.36 percent annual gain.

Fitch also noted that if the government follows through its structural refom and progresses well in its infrastructure development plan, then it may allow for a higher sustainable GDP growth.

GlobeAsia

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Jakarta. Despite Indonesia’s slow economy in the first quarter, Prudential Life Assurance, also known as Prudential Indonesia, managed to show steady growth in its total premium income, thanks to strong growth in its new business premiums and renewals from existing customers.

In a press conference on Tuesday, Prudential Indonesia, the local unit of UK-based financial services group Prudential, announced a 20 percent year-on-year growth in its total premium income to Rp 7.09 trillion ($531 million) in the first quarter of 2015.

Total income from new business premiums increased by 18 percent from January to March reaching a total of Rp 2.77 trillion from last year. Additionally, total renewal income also increased by 21 percent to Rp 4.32 trillion.

Prudential Indonesia’s finance director, John Oehmke, said the company planned to “outperform the economy” and sees “more opportunities” as he expected the economy to pick up later this year.

Prudential Indonesia’s unit-linked products which bundle insurance and investment continue to remain popular amongst customers from 2014 and have contributed to the company’s boost in its number of customers, Oehmke said.

The insurance company registered up to 2.4 million customers at the end of the first quarter of 2015, placing them as one of the market leaders in the insurance industry in Indonesia.

The Indonesian economy has been advancing at the slowest pace since the third quarter of 2009. Central Statistics Agency (BPS) data show that Indonesia’s gross domestic product expanded by 4.71 percent year-on-year in the first quarter of this year, as exports and government spending were slow.

Typically, a weaker economy has a direct affect on the insurance business since fewer customers are able to invest in premiums. Despite this, Prudential Indonesia remains positive regarding their business prospects citing an unprotected market in Indonesia,  “there is a huge protection gap in Indonesia, where many Indonesian families have yet to understand the importance of life insurance or are inadequately insured,” said Rinaldi Mudahar, the CEO of Prudential Indonesia, announcing the insurance company’s plans to “decrease [protection] gaps” in Indonesia.

Prudential Indonesia will be celebrating their 20th anniversary in November this year. The company maintains its head office in Jakarta, serving its customers through more than 240,000 sales agents in 380 agency offices all over Indonesia.

GlobeAsia

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