MANILA – Japan’s Rating and Investment Information, Inc. (R&I) on Wednesday upgraded its credit rating for the Philippines to A- with stable outlook, citing the country’s macroeconomic stability, high economic growth path, and improvement in fiscal balance.
In a statement, R&I said the country’s credit rating was changed from BBB+ with a positive outlook to A- with stable outlook.
The Philippines has so far achieved two A- ratings, the first of which was given by Japan Credit Rating Agency (JCR) in 2020.
“The Philippine economy will likely see stable growth and continuous improvement in the level of national income against the backdrop of active public and private sector investments, development of domestic business sectors such as business process outsourcing (BPO), and favorable demographics, among other elements,” R&I said.
The R&I said the Philippine economy has been exhibiting fast growth among the major economies in Southeast Asia.
It also recognized that the Philippine government has been pursuing fiscal consolidation efforts while also emphasizing support to economic growth.
“The government has higher budget allocation for education and, social welfare, on top of infrastructure investment, while pushing ahead with the measures aimed at expanding tax base,” the R&I said.
It believes that the country’s fiscal deficit and central government debt as a share of gross domestic product (GDP) will continue to decline from its peak during the pandemic, emphasizing that its debt remains affordable given manageable burden of interest payment.
The Japanese debt-watcher also acknowledged the Marcos administration’s push for reforms and programs to secure economic stability, accelerate infrastructure development, expand private investments, and create employment to improve household income and accelerate poverty reduction.
“At the center of said initiatives is the government push for infrastructure development, including 185 infrastructure flagship projects. The government plans to finance such projects without excessively relying on its budget but actively utilizing the public-private partnership (PPP) framework,” it said.
The R&I said the introduction of PPP-based infrastructure development also implies the government’s expectation for private companies to play a greater role in infrastructure projects and reduce fiscal burden.
“Given that the government has been pushing ahead with measures to ease regulations to boost private investments, R&I has a high opinion of the firm progress the government has made in further building the fundamentals toward economic growth in the medium to long term,” the R&I said.
In a separate statement, Finance Secretary Ralph Recto said R&I’s credit rating upgrade reflects robust investor confidence in the country’s high economic growth, strong fiscal position, and promising outlook.
“This is a milestone achievement. Ito ang kauna unahang credit rating upgrade sa ilalim ni President Ferdinand R. Marcos Jr. na nagpapatunay na malaki ang tiwala ng mga investors and creditors sa kanyang pagpapatakbo sa ekonomiya. (This is the first credit rating upgrade under the administration of President Ferdinand R. Marcos Jr. which proves the trust of investors and creditors in his ability to manage the economy),” he said.
Recto said the Philippines’ high credit rating sends a strong signal of confidence to investors and creditors, resulting in cheaper and more cost-effective borrowing costs for the government and the private sector.
This allows the government to channel funds that would have otherwise been allotted for interest payments towards more development programs such as more infrastructure projects, improved social services, better health care system, and quality education.
He said it will also attract more foreign investments into the country, which will create better employment opportunities for Filipinos.
“Our refined Medium-Term Fiscal Program is our blueprint for our road to A rating. This ensures that we can reduce our deficit and debt gradually in a realistic manner, while creating more jobs, increasing our people’s incomes, growing the economy further, and decreasing poverty in the process. Sticking to this program can help us get there faster,” he added. (PNA)