MAJOR debt watcher S&P Global Ratings raised its outlook on the Philippines’ credit rating from “stable” to “positive,” citing mainly the government’s policymaking that could further improve the country’s finances and economic growth.
The upgraded outlook of the country’s current rating of “BBB,” which is one notch above the minimum investment grade, means there is a chance the rating could be upgraded in the coming months.
“The positive outlook reflects our view that improvements to the Philippines policymaking settings could support a track record of more sustainable public finances and balanced growth over the next 24 months,” S&P said in a report on the Philippines released Thursday evening.
S&P cited the Comprehensive Tax Reform Program, the first package of which took effect in January, and the “Build Build Build” program, under which massive investments in infrastructure are set. Proceeds from the tax reform will partly fund the infrastructure projects, estimated at about $160 billion over the next five years up to 2022.
Meanwhile, Japan Credit Rating Agency, Ltd. announced on Thursday it kept the country’s rating of “BBB+” with a “stable” outlook on account of the economy’s robust growth and resilience to headwinds.
The Philippine economy grew 6.7 percent in 2017 to remain among the fastest growing in the Asia Pacific region.
The “BBB+” rating assigned by JCR is just a notch away from the A category.
JCR said in a report it took into account “the country’s high level of economic growth underpinned by solid domestic demand, resilience to external shocks supported by a declining external debt and accumulation of foreign exchange reserves, and the government’s comparatively sound fiscal position.”
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. welcomed the latest ratings decisions of S&P and JCR.
“Favorable credit rating actions are a welcome pat on the back. The BSP is committed to its price and financial stability mandates, which have provided an environment conducive for economic growth and stability over the years,” he said.
“At the same time, the BSP is keen on helping push the economy toward the next stage of development through financial sector reforms, which are vital for accelerating growth and making it more inclusive,” Espenilla said.
Finance Secretary Carlos Dominguez III said the positive developments reflected the increasing confidence of the international business community on the sustainability of the Duterte administration’s program for high growth and financial inclusion.
“Credit raters have seen the wisdom of the government’s growth strategy anchored on aggressive spending on infrastructure and human capital development, combined with its pursuit of bold initiatives such as tax reform to help ensure a steady revenue flow for such massive investments over the medium term,” Dominguez said.
Both S&P and JCR took note of the country’s strong external payments position.
“The country remains highly resilient to external shocks, with the ratio of its foreign exchange reserves to short-term external debt standing at 5.7 times at the end of 2017,” JCR said.