Philippine investment grade rating affirmed anew

Lawrence Agcaoili - The Philippine Star
Philippine investment grade rating affirmed anew
The Japanese credit rating agency said the Philippines has been demonstrating solid economic growth since the second quarter of last year while the world continues to face the challenges of the pandemic.
Miguel de Guzman, file

MANILA, Philippines — Tokyo-based debt watcher Rating and Investment Information Inc. (R&I) has affirmed the BBB+ credit rating  and stable outlook of the Philippines on the back of the country’s solid recovery, healthy government finances, rising investments, and a stable banking sector.

The Japanese credit rating agency said the Philippines has been demonstrating solid economic growth since the second quarter of last year while the world continues to face the challenges of the pandemic.

The Philippines emerged from the pandemic-induced recession that stretched through  five quarters with a gross domestic product (GDP) growth of 5.7 percent last year, reversing the 9.6 percent contraction in 2020.

According to R&I, the rebound was punctuated by the rise in foreign direct investments (FDIs) to a historic high of $10.5 billion last year.

For this year, Philippine economic managers are looking at a faster GDP growth of between seven and nine percent.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the coordinated approach to recovery – with the central bank’s monetary measures complementing the national government’s fiscal response  –  has worked well for the economy.

“On top of the national government’s measures, the BSP’s proactive COVID-19 response – including historic-low policy rates that supported credit activities, time-bound financing support to the national government, and a long list of regulatory relief measures for banks so that they may continue serving their customers – has helped achieve a holistic approach to Philippine economic recovery,” Diokno said.

While government debt has risen following massive spending for COVID  response, R&I pointed out that the debt level remains manageable at 60.5 percent (debt-to-gross domestic product ratio) as of end-2021 compared to a number of the country’s rating peers.

“The government debt ratio is expected to stabilize in the near term, supporting the country’s economic recovery,” the Japanese debt watcher said.

The country’s daily COVID-19 cases significantly declined from a high of 39,000 cases in mid-January this year to 272 as of April 10. Moreover, as of the same day, 74 percent of the country’s target population of 90 million had already been inoculated.

For his part, Finance Secretary Carlos Dominguez said the reaffirmation made by R&I of the country’s credit rating and outlook shows that the Philippines maintains its streak of affirmations of its investment grade credit ratings throughout the pandemic amid the wave of rating downgrades globally.

“This is a testament to our ability to strike a careful balance between supporting economic recovery, such as through relief for vulnerable sectors and infrastructure investments, and maintaining order in our fiscal house,” Dominguez said.

R&I’s affirmation, Dominguez explained, reflects confidence in the Philippines sound policy framework.

“We are committed to achieving full economic recovery within the soonest possible time while mindful of staying within the boundaries of fiscal discipline so that the debt burden from the COVID-19 crisis is not passed on to future generations. We are optimistic about the economy’s prospects – our COVID situation has improved and the latest economic reforms are seen to bring in more job-generating investments for the Filipino people,” Dominguez said.

The investment grade credit rating from R&I signals to Japanese and other foreign investors that the Philippines, given its sound macroeconomic fundamentals, is investment worthy.

Likewise, newly enacted legislative amendments that further open the economy to foreign investors including the Retail Trade Liberalization Act, Foreign Investments Act, and Public Service Act are paving the way for increased economic activities.

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