R&I affirms PHL’S BBB+ investment grade rating

JAPANESE credit watcher Rating and Investment Information Inc. (R&I) announced that it is keeping its investment grade rating of the Philippines on the back of expected recovery from the economic effects of the pandemic.

R&I affirmed the Philippines’s BBB+ with a “stable” outlook. The affirmed rating largely backed by the country’s fiscal and monetary actions which provided a “favorable outlook for the Philippines in the post-covid period.”

“The Philippines’s economy suffered a severe contraction due to the Covid-19 pandemic in 2020 but is expected to recover primarily through aggressive public investment, which had driven the economy in the past several years. Fiscal and monetary policies will boost growth for some time,” R&I said.

“With the government committed to maintaining fiscal discipline, the debt ratio will be back on a downward trajectory in the near future, in R&I’S view. In parallel with crisis responses, the government has steadily accomplished comprehensive tax reforms and various regulatory reforms,” it added.

The credit watcher also said the strength of the country’s external accounts serve as buffers against external shocks.

“The overall balance of payments is positive and foreign reserves are greater than external debt,” it said. “R&I therefore considers the risk associated with the external position to be limited,” it added.

The Japan-based ratings agency, however, said:“attention should be given to downside risk to the economy, however, as new coronavirus cases resurged in the first quarter.”

economic managers said the recent affirmation of the Philippines rating from another credit watcher serves as a “vote of confidence” to the country’s path towards recovery.

Finance Secretary Carlos Dominguez said that in keeping its “BBB+” credit rating with a “stable” outlook for the Philippines, R&I has “apparently taken notice that although the global fight against the pandemic has proven to be a costly one, the country’s strong macroeconomic fundamentals ahead of the pandemic have enabled the government to accelerate spending on urgent and necessary programs to save lives and keep the economy afloat.

“With a manageable debt profile, a steady revenue stream brought about by tax reform, and the continued practice of fiscal prudence, the government is confident it will not run out of resources in waging the protracted battle against the Covid-19 crisis.”

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin e. Diokno also welcomed the rating decision by R&I, saying, “The Philippines once again earned an important vote of confidence on its ability to bounce back from the Covid-19 crisis, with R&I’S affirmation of the country’s BBB+ rating with a ‘stable’ outlook.”

“With the recent surge in Covid-19 cases, the tail end of the crisis is proving to be extra challenging. Nevertheless, we do not see a permanent dent on our macroeconomic fundamentals, and we can head back to our growth path post-covid.