MANILA – Japan Credit Rating Agency (JCRA) on Thursday upgraded its rating on the Philippines from BBB+ to A- with a stable outlook, as it believes that the country can weather the impact of coronavirus disease (Covid-19) pandemic.
From an expected contraction this year, it forecasts growth to recover and rise to between 6 to 7 percent in the medium term.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said the Japan-based debt rater noted the improved economic fundamentals of the Philippines that makes it more resilient to the pandemic, as well as the government’s bid to implement reforms in the tax system such as through the push for the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).
It said the stable outlook on the credit rating “indicates that the “A-” will be maintained over the near term.
“JCR holds that a downturn will be limited given the country’s strengthened economic base, resilient external position, and the government’s economic stimulus package totaling more than 9 percent of GDP (gross domestic product). JCR also considers that the fiscal soundness will not be impaired because while the fiscal deficit may widen, the package at this time is justifiable and the government debt will remain comparatively subdued,” it said, quoting the JCRA statement.
The credit rater also cited as a plus to the country’s rating the strength of the domestic banking system, which recorded a capital adequacy ratio (CAR), a gauge of financial health, of 15 percent.
The country’s external debt balance, which currently stands at 22.2 percent of domestic output and the strong gross international reserves (GIR), which posted a record-high of USD90.94 billion as of end-April 2020, were also recognized.
“JCR holds that the country will show its high resilience even when global risk-off moves would be triggered again by a second wave of Covid-19 pandemic,” the debt rater said.
BSP Governor Benjamin Diokno said JCRA’s decision “is encouraging news at this challenging time.”
He said this move shows the debt rater’s “confidence that the Philippines is pursuing appropriate policies that will help Filipino individuals, businesses, and the economy at large to recover from this unprecedented crisis.”
Diokno said for one, the central bank has “implemented a long list of extraordinary relief measures, and we stand ready to do more if needed.”
“While we have temporarily veered our attention away from the ‘Road to A’ agenda because our focus at the moment is on saving lives, jobs, and livelihoods, we welcome positive assessments from international observers like JCR. We hope this helps to uplift the Filipino spirit at this trying time and to inspire us to work harder together to emerge stronger after the pandemic,” he added.
Finance Secretary Carlos Dominguez III said this achievement is a result of a team effort.
“It’s the result of the President’s strong leadership and the teamwork of the Cabinet, BSP, and the legislators,” he told journalists in a Viber message.
Meanwhile, Acting Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) Karl Kendrick Chua said the Philippines had continued to strengthen its macroeconomic fundamentals prior to the Covid-19 pandemic.
“As a result, we have sufficient fiscal space and economic resiliency to address the pandemic. We are currently working with Congress to enact a recovery program. JCR’s latest credit action in the Philippines is an affirmation of the economy’s resilience,” Chua said. (PNA)