Japan-based debt watcher Rating and Investment Information Inc. affirmed the Philippines’ investor-grade credit rating at “BBB+” but revised its outlook to positive from stable, citing the country’s robust macroeconomic fundamentals, improving fiscal position, sound banking system, comfortable external payments position and stable political environment.
Finance Secretary Benjamin Diokno said Monday R&I’s improved outlook on the Philippines brought it closer to its goal of an “A” investment-grade rating within the term of President Ferdinand Marcos Jr.
“We are firmly on track to our ‘Road to A’ and remain committed to further improving the country’s investment climate through structural reforms to enhance the quality and pace of infrastructure development,” Diokno said.
A “BBB+” rating is two ranks higher than the minimum investment grade and a notch below the ‘A-’ rating.
A positive outlook indicates the possibility of a rating upgrade once performance indicators such as the economic growth sought under the Philippine Development Plan 2023-2028, stable macroeconomic conditions and improving trend of fiscal position have been confirmed.
Diokno said the government is steadfast in its commitment to fiscal consolidation through the first Medium-Term Fiscal Framework which will help bring down the debt-to-GDP ratio to less than 60 percent by 2025, cut the deficit-to-GDP ratio to 3.0 percent by 2028 and maintain infrastructure spending at 5 to 6 percent of GDP.
This will be implemented alongside the strategies outlined in the PDP 2023-2028 to reinvigorate job creation and accelerate poverty reduction by steering the economy back on a high-growth path.
Moody’s Analytics said the Philippine economy performed well amid the volatile global landscape, citing its decelerating inflation rate and strong private consumption and investments.
R&I also noted that the country’s strong gross domestic product performance in 2022 of 7.6 percent―a 46-year high.
The Philippine economy grew by 6.4 percent in the first quarter of 2023, making it the fastest-growing economy among R&I-rated peers such as Indonesia and Mexico. This performance is within the government’s growth target of 6 percent to 7 percent for 2023.
The debt watcher said it does not view the country’s current account deficit in a negative light due to the government’s aggressive infrastructure spending that will redound to economic growth.
R&I also took note of the country’s steady inflows from overseas Filipino remittances, foreign direct investments and sufficient foreign reserves.
Countries that have been granted investment-grade ratings can access funding from development partners as well as international debt capital markets at lower costs due to its lower credit risk factor.
The “Road to A” is the Philippine government’s program to achieve an investor-grade sovereign credit rating of ‘A’ from international rating agencies. These include the “Big 3” agencies―- Moody’s Investor Service, Fitch Ratings, and S&P Global Ratings―as well as Japanese raters R&I and the Japan Credit Rating Agency.
An A rating would affirm the Philippines’ creditworthiness and would serve as a strong signal to local and international business and financial communities that the country is conducive to long-term investments.
The Philippines has a “BBB+” sovereign credit rating from S&P Global. This is one notch below the minimum A rating target of the government.
Fitch affirmed its BBB rating in May 2023 and simultaneously revised its outlook from negative to stable in view of their improved confidence in the Philippines’ strong medium-term growth after the pandemic and sustained reductions in government debt-to-GDP.
