Japanese agency affirms Philippine investment grade rating

MANILA, Philippines – Tokyo-based debt watcher Rating and Investment Information Inc. (R&I) affirmed the investment grade rating of the Philippines on the back of the country’s sound fundamentals that ward off risks to growth and stability.

The Japanese rating agency retained the one notch above the minimum investment grade rating of BBB for the Philippines on a stable outlook as the economic growth momentum is likely to be sustained under the leadership of President Rodrigo Duterte.

“The Philippines’ economy remains solid. Risks are limited in terms of external and fiscal positions, and the financial system continues to be stable. Per capita income also keeps improving,” R&I said.

Its views come amid a backdrop of ample foreign exchange reserves as well as improving government debt ratios.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the country’s gross international reserves (GIR) hit a record level of $86.1 billion as of end-September, enough to cover 10 months’ worth of imports of goods as well as of payments of services and income, and provide sufficient buffer against external shocks.

GIR is now higher than the country’s total external debt, which had declined to $77.7 billion as of end-June, equivalent to only 26.2 percent of GDP. General government debt as a percentage of GDP continues to fall, standing at 35.4 percent as of end-June compared with 36.3 percent as of end-December.

R&I cited rising private consumption and investments, which support the Philippines’ official growth targets set at six to seven percent for this year and 6.5 to 7.5 percent for 2017.

The country’s GDP growth accelerated to seven percent in the second quarter from 6.8 percent in the first quarter amid the boost from election related spending. This brought the expansion in the first half of the year to 6.9 percent from 5.5 percent in the same period last year, the highest among major ASEAN economies.

At the same time, investor confidence in the country’s growth prospects has buoyed BOI-approved investments, which jumped 49 percent year-on-year to $6.1 billion in the first nine months.

Also, investor confidence has led to sustained and rapid growth in actual net foreign direct investments (FDIs), which grew 71 percent to $5.4 billion in the first eight months from a year ago.

A seal of good housekeeping that indicates a country’s (or a rated institution’s) capacity and willingness to pay debts as they fall due, a credit rating within the investment-grade scale helps attract investments.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the affirmation of the Philippines’ BBB rating by R&I is consistent with the projection of the central bank that inflation outlook would stay well anchored and demand conditions would remain firm.

“Having said that, the BSP will continue to conduct sound and preemptive monetary policy and bank supervision to help ensure the economic gains we enjoy will not be eroded but instead will further grow,” he said

For his part, Finance Secretary Carlos Dominguez III said the favorable credit perception of the Philippines comes on the back of efforts of the Duterte administration not only to maintain economic gains of the past but to substantially build on those to achieve inclusive growth.