Finance Secretary Ralph G. Recto described Japan's Rating and Investment Information, Inc.'s (R&I) upgrade of the Philippines' credit rating to A- with a stable outlook as a reflection of robust investor confidence in the country's high economic growth, strong fiscal position, and promising outlook.
“This is a milestone achievement. Ito ang kauna unahang credit rating upgrade sa ilalim ni President Ferdinand R. Marcos, Jr. na nagpapatunay na malaki ang tiwala ng mga investors and creditors sa kanyang pagpapatakbo sa ekonomiya,” the finance chief said.
"Our refined Medium-Term Fiscal Program is our blueprint for our road to A rating. This ensures that we can gradually realistically reduce our deficit and debt while creating more jobs, increasing our people's incomes, growing the economy further, and decreasing poverty. Sticking to this program can help us get there faster," he stressed.
The Philippines' high credit rating sends confidence to investors and creditors, resulting in cheaper and more cost-effective government and private sector borrowing costs.
This allows the government to channel funds that would have otherwise been allotted for interest payments towards more development programs such as infrastructure projects, improved social services, better health care systems, and quality education.
It also attracts more foreign investments into the country, creating better employment opportunities for Filipinos.
The recent upgrade has allowed the Philippines to achieve two A- ratings, the first of which was given by the Japan Credit Rating Agency (JCR) in 2020. The country has successfully maintained high investment-grade status across all major regional and international debt rating agencies.
In its report dated August 14, 2024, the R&I cited the Philippines' macroeconomic stability, high economic growth path, and continuous improvement in fiscal balance as critical factors for the rating upgrade.
In particular, the R&I recognized that the Philippine government has been pursuing fiscal consolidation efforts while emphasizing economic growth support.
"The government has a higher budget allocation for education and social welfare, on top of infrastructure investment, while pushing ahead with the measures aimed at expanding the tax base," the R&I said.
The Japanese debt-watcher believes that the country's fiscal deficit and central government debt as a share of GDP will continue to decline from its peak during the pandemic, emphasizing that its debt remains affordable given the manageable interest payment burden.
The R&I also highlighted that the Philippine economy has been exhibiting fast growth among the major economies in Southeast Asia.
It projects economic growth to remain strong and stable over the medium and long term, aided by robust public and private sector investments, the development of domestic business sectors such as business process outsourcing (BPO), and favorable demographics.
The agency acknowledged the Marcos, Jr. administration's strong push for reforms and programs to secure economic stability, accelerate infrastructure development, expand private investments, and create employment to improve household income and accelerate poverty reduction.
"Given that the government has been pushing ahead with measures to ease regulations to boost private investments, R&I has a high opinion of the firm progress the government has made in further building the fundamentals toward economic growth in the medium to long term," the report said.
The Philippine government has maintained regular dialogue with the R&I and other major credit rating agencies. The economic team recently met with R&I on June 20 in Tokyo, Japan, to provide a comprehensive briefing on the Philippine economy.
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