Philippines Gets Credit Rating Upgrade from R&I

The Philippines has received a credit rating upgrade from Rating and Investment Information, Inc. (R&I), a Japan-based credit rating agency, as it recognized the country’s strong economic performance and sound fiscal management.

R&I affirmed the Philippines’ credit rating of “BBB+” and revised its outlook to “positive” from “stable” in a report released on 7 August 2023. A “BBB+” rating is two notches higher than the minimum investment grade and a notch below the “A-” rating. A “positive” outlook indicates that R&I may raise the rating further if the country sustains its growth momentum and fiscal discipline.

According to R&I, the Philippines has maintained robust macroeconomic fundamentals, supported by decelerating inflation, strong private consumption and investments, improving fiscal position, sound banking system, comfortable external payments position, and stable political environment.

The Japanese debt watcher said that the Philippine economy grew by 7.6 percent in 2022, surpassing the government’s target, and continued to expand by 6.4 percent in the first quarter of 2023, making it the fastest-growing economy among R&I-rated peers, such as Indonesia and Mexico.

R&I also noted that the country’s current account deficit is not a cause for concern as it reflects the government’s aggressive infrastructure spending, which leads to economic growth. It added that the country has steady inflows from overseas Filipino remittances and foreign direct investments, as well as ample foreign reserves.

Moreover, R&I praised the government’s efforts to pursue structural reforms and improve infrastructure development that are necessary to sustain high and inclusive growth. It cited the economic liberalization measures, such as the amendments to the Retail Trade Liberalization Act, Foreign Investments Act, and Public Service Act, as well as the opening up of the renewable energy sector to full foreign ownership.

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. welcomed the credit rating upgrade and said that the Philippine banking system remains a source of strength as it continues to support the funding needs of the country’s growing economy.

“Our Philippine banks have maintained more than adequate levels of capital and remained flush with liquidity. Unlike in previous crises, our banks are part of the solution rather than part of the problem,” Governor Remolona said.

He also said that inflation continued to ease, supporting the BSP’s assessment that inflation will return to the target range by Q4 2023. “Nonetheless, if upside risks persist, the BSP is prepared to resume monetary policy tightening as necessary to anchor inflation expectations and safeguard the BSP’s price stability objective,” he added.

Finance Secretary and Monetary Board Member Benjamin E. Diokno expressed his gratitude to R&I for recognizing the country’s achievements and potentials. He said that the economic team remains committed to pursuing prudent fiscal management and implementing key reforms that will boost the country’s resilience and competitiveness.

“We are confident that with our sound macroeconomic fundamentals, proactive policy responses, and strategic recovery plan, we will be able to overcome the challenges posed by the global economic uncertainties and achieve our long-term vision of a prosperous, inclusive, and resilient Philippines,” Secretary Diokno said.

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