Japan’s Rating and Investment Information Inc. (R&I) upgraded the Philippines’ credit rating to ‘A-’ with a stable outlook, the first under the Marcos administration.
R&I, in its report dated Aug. 14, 2024, cited the Philippines’ macroeconomic stability, high economic growth path and continuous improvement in fiscal balance as key factors for the rating upgrade.
R&I 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.
Finance Secretary Ralph Recto said the credit rating upgrade would translate into cheaper borrowing costs and stronger investor confidence.
“This is a milestone achievement. This is the first credit rating upgrade under the administration of President Ferdinand Marcos Jr. which affirms the big confidence of investors and creditors in his management of the economy,” Recto said in a statement.
“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 said.
He 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.
It also attracts more foreign investments into the country, which will create better employment opportunities for Filipinos.
The upgrade allowed the Philippines to already achieve two A- ratings, the first of which was given by Japan Credit Rating Agency (JCR) in 2020. The country successfully maintained its high investment-grade status across all major regional and international debt rating agencies.
R&I said it believes that the country’s fiscal deficit and central government debt as a share of GDP would continue to decline from its peak during the pandemic, emphasizing that its debt remains affordable given manageable burden of interest payment.
It also highlighted that the Philippine economy has been exhibiting fast growth among the major economies in Southeast Asia.
It expects economic growth to remain strong and stable over the medium and long term on the back of robust public and private sector investments, development of domestic business sectors such as business process outsourcing (BPO), and favorable demographics, among other elements.
The agency acknowledged the Marcos administration’s strong push for reforms and programs to secure economic stability, accelerate infrastructure development, expand private investments and create employment with the end goal of improving household income and accelerating poverty reduction.
“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 report said.
The government has maintained regular dialogue with the R&I and other major credit rating agencies. The economic team recently met with R&I on June 20, 2024 in Tokyo, Japan to provide a comprehensive briefing on the Philippine economy.
