JAPAN Credit Rating Agency (JCR) on Friday affirmed the Philippines’s investment-grade credit rating of A- with a stable outlook on the back of the country’s sustained economic growth that has been “resilient” to external shocks.
“The ratings mainly reflect the country’s high and sustained economic growth performance underpinned by solid domestic demand and its resilience to external shocks supported by an external debt kept low relative to GDP and the accumulation of foreign exchange reserves,” JCR said in a statement.
The credit watcher noted that the Philippines’s debt-to-GDP ratio at the end of 2022 remained within the 50-percent level, making it one of the lowest among the sovereign states it rated in the A-range.
“Hence, JCR does not consider that fiscal soundness will be impaired. Remittances from Filipinos abroad remain solid and the economy stays highly resilient to external shocks. Based on the above, JCR has retained the ratings with Stable outlook,” it said.
The JCR took note of the Marcos administration’s economic programs and platforms such as sustained infrastructure development, slashing the government debt in ratio to the country’s GDP, as well as passage of various tax reforms that were initiated by the previous administration.
The JCR added that the country’s foreign currency liquidity position remains “robust” as its gross international reserves stood at $99.3 billion as of end-February.
The JCR noted that the national government was able to keep its external debt balance at 26.8 percent of GDP at the end-September 2022.
“These indicate the robustness of the country’s foreign currency liquidity position. JCR holds the view that the country will show its high resilience even when global risk-off moves are triggered again,” it said.
Income disparity
The credit watcher, however, pointed out that the “reduction of income disparity” in the Philippines through rural development remains an “important” task for the national government.
The Department of Finance (DOF) noted that the credit rating affirmation came after the country posted a 7.6-percent economic growth last year, exceeding the national government’s target.
The DOF emphasized that the Philippines’s current credit rating “indicates lower credit risk and entails better access to the international bond market and favorable interest rates.” The agency added it would also boost investor confidence in the country that could result in more foreign direct investments.
“The Marcos administration is committed to maintaining sound macroeconomic fundamentals and achieving its fiscal targets by continuing the course of sound fiscal management,” Finance Secretary Benjamin Diokno said in a statement on Friday.
“The country’s recent structural reforms will also enable the country to withstand the pandemic shocks and map a route to recovery,” Diokno added.
The DOF said the national government would sustain its implementation of reforms that would “foster investment-led growth, which will help broaden opportunities for quality employment and further enhance productivity.”
“With the Philippine Development Plan 2023-2028, the government will steer the country towards a path that promotes inclusive growth, provides equal opportunities to Filipinos, and enables them to participate in an innovative and globally competitive economy,” it said.