R&I raises PHL’s credit rating to ‘A-‘

By means of Luisa Maria Jacinta C. Jocson, Reporter

The JAPAN-based Rating and Investment Information, Inc. (R&I) has upgraded the Philippines’ investment grade rating to “A-” due to the country’s strong economic performance.

“Based on the macroeconomic stability and high economic growth path, as well as the expected continued improvement in the fiscal balance, R&I has upgraded its foreign currency issuer rating to ‘A-‘,” the report said on its website.

This was one step higher than the previous rating of “BBB+” that the country was awarded a year ago in August.

The credit rating agency also assigned a “stable” outlook for the Philippines, up from previously “positive.” According to R&I, a positive or negative outlook is not a statement indicating a future change in a rating. If neither a positive nor a negative outlook is appropriate, it is said to be a stable outlook.

“The Philippine economy is likely to see stable growth and continued improvement in the level of national income against the backdrop of, among others, active investments in the public and private sectors, the development of domestic business sectors such as business process outsourcing and a favorable demographic development.” said.

The Philippine economy grew by 6.3% in the second quarter, the fastest growth rate ever Ffive quarters or since 6.4% in the Ffirst quarter of 2023.

“The Philippine economy is showing rapid growth among major economies in Southeast Asia,” it added.

At 6.3%, the Philippines’ gross domestic product (GDP) growth in the second quarter was the second fastest in Southeast Asia, behind only Vietnam (6.9%) and ahead of Malaysia (5.8% ) and Indonesia (5%).

The government is targeting growth of 6-7% this year and 6.5-7.5% for 2025.

R&I also noted that the country has improved Fiscal management because the debts remain “aFfordable, given the manageable burden of interest payments.”

“The FFinancial balance as a percentage of GDP, which had deteriorated during the COVID-19 (coronavirus disease 2019) pandemic, has improved and the government debt ratio is likely to start declining within a year or two,” it added.

From the second quarter, the government hasFThe ICIT/GDP ratio was 5.3%, still below 5.6%Ficit ceiling set for this year.

Meanwhile, the debt ratio fell to 60.9% in the second quarter from 61% a year earlier. It is expected to decline further to 60.6% by the end of 2024.

R&I also said that the Philippines’ current account will be theFicit is also “not necessarily a negative element” in his assessment.

“The foreign exchange reserves are sufficient compared to those of imports. Despite liabilities exceeding financial assets in the international investment position, the gap between liabilities and assets remains low relative to GDP. R&I therefore believes that the external risk is limited.”

The central bank expects a current account balance of $4.7 billionFcicit for 2024, which corresponds to 1% of GDP. The current account theFicit amounted to $1.7 billion the Ffirst quarter, equivalent to 1.6% of GDP.

Meanwhile, Treasury Secretary Ralph G. Recto said in a statement that these were the Marcos the first upgrade of the government’s credit rating.

“Our reFThe integrated medium-term budget program is our blueprint for our ‘pathway to an A rating’,” he said.

“This ensures that we can reduce our energy consumptionFto gradually reduce debt and indebtedness in a realistic way, while creating more jobs, increasing the incomes of our people, continuing to grow the economy and thereby reducing poverty. If we stick to this program, we can get there faster.”

The Finance Ministry said better creditworthiness of R&I will help attract foreign investorstors and access to more aFaffordable loan terms.

“This allows the government to channel money that would otherwise have been spent on interest payments into more development programs, such as more infrastructure projects, improved social services, a better healthcare system and quality education.”

The Bangko Sentral ng Pilipinas (BSP) said the credit upgrade means lower credit risk, allowing “a country to access financing from development partners and international debt capital markets at a lower cost.”

“The BSP is committed to carrying out its mandate of promoting price stability, Ffinancial stability, and a safe and effICT payment and settlement system because it broadly supports sustainable and inclusive economic growth,” said BSP Governor Eli M. Remolona Jr.

Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said the latest credit upgrade puts the Philippines three notches above the minimum investment grade rating.

“This is already comparable and somewhat in line with the ‘A-‘ credit rating of another Japanese rating agency, JCR,” he added.

The Philippines is currently rated “A-” by the Japan Credit Rating Agency (JCR), “BBB” by Fitch Ratings, “Baa2” by Moody’s Ratings and “BBB+” by S&P Global Ratings.

The government aims to achieve an “A” level rating before the end of the government.