Japan’s Rating and Investment Information, Inc. (R&I) has upgraded the country’s credit rating to A minus (A-) with stable outlook, which reflects robust investor confidence in the country’s high economic growth, strong fiscal position, and promising outlook.
“This is a milestone achievement,” Finance Secretary Ralph Recto said of the event representing the first credit upgrade under the watch of President Ferdinand R. Marcos Jr. and testament to continued investor or creditor interest in the country’s macroeconomic prospects.
“Our refined Medium-Term Fiscal Program is our blueprint for our road to A rating. This ensures that we can reduce our deficit and debt gradually in a realistic manner, while creating more jobs, increasing our people’s incomes, growing the economy further, and decreasing poverty in the process. Sticking to this program can help us get there faster,” he said.
Recto explained the high credit rating sends a strong signal of confidence to investors and creditors resulting in cheaper and more cost-effective borrowing costs for the government and the private sector.
This allows the government to channel funds that would otherwise have been allotted as interest payments on maturing debt instead of on development programs such as more infrastructure projects, improved social services, better health care system, and quality education.
It also attracts more foreign investments into the country, which will create employment opportunities for Filipinos.
The upgrade has allowed the Philippines to already achieve two A minus ratings, the first of which was given by the Japan Credit Rating Agency (JCR) in 2020. The country has successfully maintained its 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 key factors for the rating upgrade.
In particular, the R&I recognized that the Philippine government has been pursuing fiscal consolidation efforts while also emphasizing support to economic growth.
“The government has 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 a manageable burden of interest payment.
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 on the back of robust public and private sector investments, development of domestic business sectors such as business process outsourcing (BPO), and favorable demographics, among other elements.
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 with the end goal of improving household income and accelerating 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 government has maintained regular dialogue with the R&I and other major credit rating agencies. The economic team recently met with R&I in Tokyo to provide a comprehensive briefing on the Philippine economy.
