Investment-grade credit rating stays

Japanese debt watcher also keeps ‘stable’ outlook on Philippines

MANILA, Philippines — Tokyo-based Rating and Investment Information Inc. has affirmed the Philippines’ investment-grade credit rating of BBB+ and stable outlook,  indicating a vote of confidence on the economy’s COVID-19 recovery and growth prospects over the medium term.

The Japanese debt watcher said it recognized the role of fiscal and monetary actions in providing a favorable outlook for the Philippines in the post-COVID period.

“The Philippine economy suffered a severe contraction due to the COVID-19 pandemic in 2020 but is expected to recover primarily through aggressive public investment, which had driven the economy in the past several years. Fiscal and monetary policies will boost growth for some time,” R&I said in a report.

BBB+ is a notch away from the minimum rating within the A-territory ratings, while a “stable” outlook indicates absence of factors that may cause the rating to change over the short term.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the affirmation indicates the Philippines once again earned an important vote of confidence on its ability to bounce back from the COVID-19 crisis.

“With the recent surge in COVID-19 cases, the tail-end of the crisis is proving to be extra challenging. Nevertheless, we do not see a permanent dent on our macroeconomic fundamentals, and we can head back to our growth path post-COVID,” Diokno said.

The BSP chief said the favorable inflation outlook and stable banking system as well as the speed of financial digitalization happening in the economy are good reasons to be confident about the Philippines’ medium and long-term growth prospects.

“Inflation, although seen to slightly breach the target range this year, will ease to within the two to four percent target band next year. Moreover, the banking sector, although not totally unscathed, has kept the impact of the crisis manageable and remains well capable of helping support economic recovery and growth through credit,” Diokno said.

Finance Secretary Carlos Dominguez said R&I noted that because of the  Philippines’ strong macroeconomic fundamentals, the government  was able to accelerate spending on urgent and necessary programs to save lives and keep the economy afloat.

“With a manageable debt profile, a steady revenue stream brought about by tax reform, and the continued practice of fiscal prudence, the government is confident it will not run out of resources in waging the protracted battle against the COVID-19 crisis,” Dominguez said.

Dominguez said R&I has acknowledged the government’s commitment to pursue the remaining reforms in its socioeconomic agenda even if it remains preoccupied with the challenges of the pandemic – and this resolve will let the Philippines return soon enough to its pre-pandemic path of high and inclusive growth.

He said the government’s commitment to economic reform and recovery has been proven by, among others, the enactment of stimulus measures like Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) as well as RA 11523 or the Financial Institutions Strategic Transfer (FIST).