Philippines gets JCR upgrade, nears top credit rating

MANILA, Philippines — The Philippines is close to attaining its first-ever A credit rating after securing an outlook upgrade from Japan Credit Rating Agency Ltd. (JCR) to positive from stable, citing the government’s twin efforts to accelerate infrastructure development and boost revenues through tax reform.

This means the Philippines is now only a step away from securing a single-A credit rating from the Japanese debt watcher.

A single A credit rating will place the Philippines on the radar screen of even more portfolio investors, given that some institutional investors have a policy of investing only in bonds issued by A-rated sovereigns or corporate entities.

This is the second outlook upgrade for the Philippines after receiving a positive outlook from S&P Global Ratings in April last year.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the central bank would continue to provide an enabling environment for sustainable, robust, and more inclusive economic growth by staying committed to its price and financial stability mandates.

“The Philippines’ robust economic growth is sustainable over the long haul, in part because of the BSP’s commitment to maintain price stability and the soundness of the banking and financial system,” Diokno said.

Finance Secretary Carlos Dominguez said the positive outlook is in “recognition of the Duterte administration’s aggressive yet prudent economic policy of spending big on infrastructure modernization while maintaining fiscal discipline.”

“The ratings mainly reflect the country’s high and sustainable economic growth performance underpinned by solid domestic demand, resilience to external shocks supported by an external debt kept low relative to GDP and the accumulation of foreign exchange reserves, and the government’s sound fiscal position,” JCR said in a statement.

It said the massive infrastructure projects being undertaken would help sustain robust economic growth for the country over the medium to long term.

“The improvement of the investment environment through infrastructure development had been a long-standing policy issue for the Philippines. However, infrastructure development has accelerated under the Duterte administration amid expanding expenditures based on its Public Investment Program and improved budget execution rate brought by budget reforms,” it said.

The debt watcher said the Comprehensive Tax Reform Program (CTRP) would help ensure that the government keeps its fiscal house in order despite its augmented infrastructure spending.

 “As part of its efforts to secure the necessary financial resources for such expanding expenditures, the government has been vigorously pursuing its CTRP. A strengthened tax base and increasing revenues brought by robust economic growth have made infrastructure development possible while maintaining fiscal discipline,” JCR said.