Moody's Investors Service's outlook for non-financial corporates in Indonesia is stable in 2014.
Moody's outlook is driven by its expectation that modest domestic growth will be supportive of key sectors, such as telecoms, media and property, and general consumer spending.
Against this, fuel tax hikes passed in June are likely to dampen domestic consumption, while elections in mid-2014 will bring temporary policy uncertainty for companies in Indonesia. Further pressures are expected in the commodity sectors, although the worst has passed.
Moody's could move to a positive outlook if the new government enacts pro-growth policies, commodity prices rebound off recent lows and are sustainable in the near term, or companies start deleveraging.
On the other hand, Moody's would consider a negative outlook if commodity prices deteriorate; rising interest rates or a weakening rupiah restrain investment in core sectors like property or infrastructure; or corporate issuers see a deterioration in liquidity, high refinancing requirements and rising borrowing costs.
In the oil, gas and petrochemical sectors, Moody's expects companies -- such as state-owned oil and gas company Pertamina -- to continue investing heavily in growth and diversification amid a widening gap between the country's crude oil output and consumption. At the same time, political and regulatory uncertainties continue to cloud our stable outlook for the sector.
Moody's has a negative outlook for the mining sector, where we see the weak pricing environment for coal and nickel producers continuing amid excess supply.
Meanwhile, Moody's outlook is stable in the telecommunications sector, where demand for data services will drive earnings growth, but squeeze margins.
And in the palm oil sector, we expect prices to stabilize at or above MYR2,240/tonne in 2014. However, company margins will fall as a result of moves towards downstream processing and more vegetable oil trading. Moody's outlook is stable.