Japan debt watcher upholds PH's 'BBB' investment rating, with 'stable' outlook
Japan-based debt watcher Rating and Investment Information, Inc. (R&I) on Friday affirmed the Philippines’ investment grade rating of “BBB,” highlighting the country’s sound fundamentals that ward off risks to growth and stability.
The “BBB” rating, which is a notch above the minimum investment grade, is assigned a “stable” outlook given likelihood that factors supporting the rating will be more or less firm over the medium term under the leadership of President Rodrigo Duterte.
“The Philippines’ economy remains solid. Risks are limited in terms of external and fiscal positions, and the financial system continues to be stable. Per capita income also keeps improving,” R&I said in a statement.
Its views come amid a backdrop of ample foreign exchange reserves as well as improving government debt ratios.
Gross international reserves, at $86.1 billion as of end-September 2016, an amount enough to cover 10 months’ worth of imports of goods as well as of payments of services and income, provide sufficient buffer against external shocks.
GIR is now higher than the country’s total external debt, which had declined to $77.7 billion as of end-June, equivalent to only 26.2 percent of gross domestic product (GDP).
General government debt as a percentage of GDP continues to fall, standing at 35.4 percent as of end-June 2016 compared with 36.3 percent as of end-December 2015.
Meantime, R&I also mentioned rising private consumption and investments, which support the Philippines’ official growth targets set at 6.0-7.0 percent for this year and 6.5-7.5 percent for 2017.
In the first semester of 2016, real GDP growth averaged 6.9 percent, the highest among major ASEAN economies.
At the same time, investor confidence in the country’s growth prospects has buoyed BOI-approved investments, which jumped 49 percent year-on-year to $6.1 billion in the first nine months of 2016.
Also, investor confidence has led to sustained and rapid growth in actual net foreign direct investments (FDIs), which grew by 71 percent year-on-year to $5.4 billion in the first eight months of 2016.
A seal of good housekeeping that indicates a country’s (or a rated institution’s) capacity and willingness to pay debts as they fall due, a credit rating within the investment-grade scale helps attract investments.
As such, the country’s top economic officials welcomed R&I’s decision, which is a vote of confidence on the ability of the Philippines to stay on a robust growth path.
“The favorable credit perception of the Philippines comes on the back of efforts of the Duterte administration not only to maintain economic gains of the past but to substantially build on those to achieve inclusive growth. By 2022, we aim to have a Philippines that will have become an upper middle-income economy as a result of further reforms that have decisively attacked poverty, attracted more investments, and created enough jobs for all Filipinos,” Finance Secretary Carlos Dominguez III said.
Dominguez noted that soon after the elections and even before the inauguration of Duterte and his Cabinet, the new administration already had announced its 10-point socio-economic development agenda.
Central bank Governor Amando M. Tetangco, Jr. said: “The affirmation of the Philippines’ BBB rating by R&I is consistent with the projection of the Bangko Sentral ng Pilipinas that the inflation outlook stays well anchored and demand conditions remain firm, which bode well for economic growth. Having said that, the BSP will continue to conduct sound and preemptive monetary policy and bank supervision to help ensure that the economic gains we enjoy will not be eroded but instead will further grow.”
The BSP, which again kept policy settings unchanged during last Thursday’s Monetary Board meeting, has ample monetary policy space to address shocks. DMS