MANILA, Philippines – The Philippines nabbed the much-coveted A grade, as the Japan Credit Rating Agency (JCR) upgraded the country’s credit rating to A- from BBB+ with stable outlook.
The upgrade comes as the world struggles to combat the coronavirus pandemic and countries look for sources of cash to fund their response.
JCR said on Thursday, June 11, that it took into account the Philippines’ strong fundamentals and its response to the coronavirus crisis. (READ: EXPLAINER: What’s in it for us if the PH has good credit ratings?)
“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% of GDP (gross domestic product),” it said.
The Philippine economy is headed for a recession, with the budget deficit widening due to revenue shortfalls and massive borrowings.
But “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.”
Before the crisis, the government’s economic team had the “Road to A” initiative, but later on said that it would not be their focus anymore due to the pandemic.
“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,” Bangko Sentral ng Pilipinas Governor Benjamin Diokno said.
Acting Socioeconomic Planning Secretary Karl Chua added that the latest credit action is an affirmation of the economy’s resilience.
“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,” Chua said.
JCR’s upgrade came following the decision of Fitch Ratings to lower its outlook for the Philippines to stable from positive, but affirmed the country’s BBB rating.
S&P Global Ratings affirmed the country’s rating at BBB+, while Moody’s maintained the Baa2 rating.
Credit ratings measure a country’s ability to pay back debt.
A higher credit rating also means that the government and private businesses can borrow at lower interest rates. – Rappler.com