UPDATE 1-Moody's ups Indonesia's rating, still junk status

JAKARTA/HONG KONG, Sept 16 - Moody's Investors Service raised Indonesia's sovereign rating by one notch to Ba2, praising the country's economic resilience and upbeat growth prospects.

Moody's sovereign rating for Indonesia, Southeast Asia's biggest economy, is still two notches below investment grade, and is now at the same level as Fitch Ratings but one notch above that of Standard & Poor's Ratings Services.

Moody's said the outlook on the rating is stable. Moody's analyst Aninda Mitra said Indonesia's economy could weather the global uncertainties better than other sovereigns in the Ba-rating category and compared with its regional peers.

He said management of the economy was improving and the appropriate policy stance was expected to persist in the foreseeable future.

"These developments highlight the growing credibility and predictability of government policies, and are expected to ensure macro-economic stability," he said.

Analysts said the ratings upgrade by Moody's had largely been expected.

"It's already been priced in by the market. If you see our CDS (credit default swap), for example it's now at 200 basis points," said Handy Yunianto, debt market analyst at Mandiri Sekuritas.

"And the yield on our global bonds is down to 5 to 6 percent, compared with 11 to 12 percent when our government issued the bonds" earlier this year, he said.

Analysts said the government needs to accelerate its reform measures in order to achieve an investment rating upgrade in near term.

"It will likely need at least two years for the country to achieve an investment grade rating," said economist Anton Gunawan of Bank Danamon. "This will require significant progress."

(Reporting by Umesh Desai in Hong Kong, Gde Anugrah Arka, Dicky Kristanto and Andreas Ismar in Jakarta; Editing by Sara Webb) ((umesh.desai@thomsonreuters.com; +852 2843 6935; Reuters Messaging: umesh.desai.reuters.com@reuters.net; ))