MANILA, Philippines — The economic team of the incoming administration of president-elect Ferdinand Marcos Jr., headed by incoming finance secretary and current Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, is set to unveil a new Road to A credit rating program soon.
In an interview with the ABS-CBN News Channel (ANC), Diokno said he was optimistic that the Philippines would finally achieve the much coveted A rating as the country continues to bounce back strongly from the impact of the pandemic.
“I am confident that with the program that we are going to unveil in a few weeks, we will achieve the A rating that we are aspiring for,” Diokno said.
According to Diokno, the Philippines was on its way to achieving the A credit rating, but the pandemic struck.
“Definitely, I think the prospects are bright. We were almost there, but the pandemic got in the way. During the entire pandemic period, the rating agencies, both international and regional, affirmed our investment grade rating,” the incoming finance chief said.
A higher credit rating allows borrowers, both the government and the private sector, to easily borrow money from the debt market or financial institutions at a lower interest rate.
S&P affirmed the BBB+ rating of the Philippines, one notch below minimum A rating, on a stable outlook in May last year.
Likewise, Moody’s Investors Service maintained the Philippines’ Baa2 rating, one notch above minimum investment grade, on stable outlook in April last year.
Despite revising the country’s outlook to negative from stable in July last year due to the impact of the global health crisis, Fitch Ratings affirmed the Philippines’ credit rating at BBB, also a notch above minimum investment grade.
As head of the economic team of the new administration, Diokno intends to focus on achieving a sustained and broad-based economic growth rather on traditionally concentrating on raising revenues to finance government priorities and to manage debt.
“I think at this juncture in our history, the DOF should focus on sustaining growth, making it broad based, making it stronger, because growth will actually solve a lot of our problems,” Diokno said.
The government, he explained, would have to continue its objective of reducing poverty in the country.
“We feel that if we grow at six percent on a consistent basis, poverty in this country will be down to single digit by the end of the Marcos administration. By pursuing growth, we will solve our revenue problem and our deficit problem and will also help us achieve our goals to be an upper-middle income country in a few years,” Diokno said.
Focusing on the economy, he added, would help the Philippines achieve an A rating faster.
“This has always been our objective, our Road to A. While we got affirmation during the pandemic of our investment credit ratings, we wan to have an A rating sooner rather than later,” Diokno said.
Aside from bringing down the poverty rate, Diokno said the incoming administration intends to gradually reduce the deficit-to-GDP ratio of three percent by the end of the term of President Marcos after swelling to a record high of P1.67 trillion or 8.6 percent of GDP last year.
Diokno said the deficit-to-GDP ratio would be trimmed to 7.6 percent this year, 6.1 percent in 2023, 5.1 percent in 2024, and 4.1 percent in 2025.
“I am very confident that with the new tax system, we will be able to raise enough taxes to ensure that we meet out deficit targets,” the incoming DOF chief said.