Singapore, July 24, 2009 -- Moody's Investors Service says that the positive outlook it assigned in June to Indonesia's Ba3 sovereign credit ratings remains intact, despite the deadly explosions that hit two hotels in the country's capital last Friday.
Although this latest terrorist attack comes as a shock after four years of quiet, it is unlikely to imperil Indonesia's overall political stability or severely dent its economic outlook.

In fact, the July 17 bombings have had a very fleeting and minimal impact on Indonesia's equity and foreign exchange markets, and Moody's does not expect them to have any significant, lasting negative effects on investor confidence in the economy.
This proved to be the case with previous terrorist bombings -- as tragic as they were in terms of the lives they claimed and the carnage they inflicted -- in Bali, at the Australian Embassy, and at the Marriott Hotel in Jakarta.
At the same time, the Indonesian government is mindful about the possibility of a longer, negative effect on tourism and foreign travel to the capital.
In the post-Suharto era, the stability of Indonesia's political and civil institutions has strengthened. This has resulted from devolution of political power to local governments, implementation of a well-managed system of fiscal decentralization, progress in reducing corruption, and a deepening of democracy within an ethnically and religiously heterogeneous state.
Furthermore, the political and security responses to several large scale incidents of terrorism, from earlier this decade, have also eroded the lethal reach of Jemah Islamiyah -- the main Islamic terror network in the archipelago -- but the risk of sporadic incidents, as is evident, has not been fully eliminated. At the same time, these risks are currently incorporated into our sovereign ratings mechanics for Indonesia.
Indonesia's recently concluded elections also provide the authorities with the mandate and legislative scope to re-invigorate its political and security responses to embedded extremist challenges.
In view of the factors discussed above, we think it is likely that authorities will continue to wage an effective anti-terrorist campaign against the remnants of Islamic terror groups across the archipelago, although it will be difficult to completely wipe out the threat.
Our views were reinforced by a recent trip we undertook to Jakarta. And our views are also in keeping with an appropriate differentiation of a manageable political shock that does not reflect widespread political instability. This has also been the case elsewhere, with the Lashkar-e-Taiba attacks in Mumbai, the Abu Sayyaf attacks in the Philippines and the Al Qaeda terror attacks in Jordan and Saudi Arabia. That is, as terrible as they were, they did not reflect any underlying or result in any widespread political instability.

Source :Moody's Investors Service, Inc