JAPAN Credit Rating Agency (JCR) announced on Monday that it is affirming its rating of the country amid the persistence of Covid-19 outbreaks, citing the country’s “high and sustainable economic growth performance underpinned by solid domestic demand.”
In a statement published on its web site, JCR said it is affirming its A- rating on the country’s Foreign Currency Long-term Issuer Rating with a stable outlook.
“The ratings mainly reflect the country’s high and sustainable economic growth performance underpinned by solid domestic demand, its resilience to external shocks supported by an external debt kept low relative to GDP and the accumulation of foreign exchange reserves, the government’s solid fiscal position, and a sound banking sector,” JCR said.
The ratings agency said that at the moment, recovery of economic activities is being delayed due to re-strengthened mobility restrictions forced by the resurgence of Covid-19, fueled mainly by the Delta variant.
JCR said, however, the government has been “swiftly implementing adequate measures such as increased public health-related expenditures, acceleration of
vaccination.”
The ratings agency added: “JCR does not consider that the fiscal soundness will be impaired because while the fiscal deficit has widened, the support package at this time is backed by appropriate fiscal policies and the government debt will remain comparatively subdued. Legislation proposals including tax reforms have been steadily progressing backed by the administration’s high performance and trust ratings.”
It said, “Remittances from workers abroad remain solid and the Philippine economy stays highly resilient to external shocks even amid the deteriorated global economic conditions. Based on [this], JCR has retained the ratings with a stable outlook.”
Economic managers in the country welcomed the affirmation, calling it a vote of confidence in the Philippine economy amid turbulent waters.
“We thank JCR for seeing through the short-term challenges confronting the Philippines and recognizing the Duterte administration’s scaled-up efforts to put the economy back to its high-growth path. Such recovery programs include the faster Covid-19 vaccination deployment; accelerated infrastructure development; and continued push in Congress for further reforms to super-charge the economy and modernize taxation,” Finance Secretary Carlos Dominguez III said.
“The Philippine government aims to achieve a strong and quick economic recovery through sustained spending on its priority programs and productive investments while maintaining deficit and debt manageability. We are not passing on unsustainable debts to future generations, even as we continue to spend more on pandemic response and on economic recovery to ensure robust medium- and long-term growth prospects for the Philippines,” he added.
JCR projects the country’s economic growth in 2021 to hit 4 to 5 percent due to the resurgence of the pandemic since the middle of the year.
“Once the pandemic gets subdued, however, the country’s potential growth will recover and the economy is expected to return to a high growth path,” JCR said, citing the large-scale infrastructure development plan that has been progressing under the public investment program worked out by the administration.
The ratings agency also said the country’s debt-GDP ratio will likely stay at 50 percent levels despite the projected lower fiscal deficit.
Image courtesy of Nonie Reyes
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