Tokyo-based Ratings and Investment Information Inc. (R&I Ratings) has lifted its rating outlook for the Philippines from stable to positive, citing the country’s strong macroeconomic fundamentals.
In a statement, R&I Ratings said that the Foreign Currency Issuer Rating of the country was changed to BBB-, while the Philippines’ Foreign Currency Short-term Debts was changed to a-2.
R&I said that the country’s economy has started to show strong growth because of the robust consumption driven by remittances from overseas Filipino workers, coupled with expansions in public investment and exports.
It cited factors such as the 7.8-percent real gross domestic product (GDP) in the first quarter of 2013, and the benign inflation which is expected to be within the 3-percent to 5-percent range targeted by the Bangko Sentral ng Pilipinas.
“The Philippines is the only country which has yet to reach per-capita GDP of $3,000 among the five founding members of Asean [Association of Southeast Asian Nations]; at long last, the country sees a clearer opportunity for catching up,” it stated.
R&I added that sustained current account surplus also supported the rising level of foreign reserves.
“This has diminished concern about external liquidity. With the steady progress of fiscal consolidation, the government is now able to allocate more fiscal budgets, albeit gradually, to infrastructure projects and educational policies,” it stated.
Moreover, R&I said that investment and consumption will be the key to future economic growth. It said that public investment like the public-private partnerships are expected to gain momentum.
The ratings agency noted that a contribution of fixed capital formation, including private investment, to the economic growth is relatively high, adding that, “Whether such trend will be translated into a steady rise in investment ratio, and in turn, investment will serve as a growth driver, along with consumption, will be the key to future economic growth.”
It also hinted a possible upgrade for the country if the key economic fundamentals remain strong.
“If fundamentals for economic growth are solidified and steady increases in per-capita income become more promising, R&I will consider a rating upgrade. R&I has thus affirmed the issuer rating, and changed the rating outlook to positive,” it stated.
To date, credit-ratings agency such as Fitch Ratings, Standard & Poor’s and Japan Credit Rating Agency Ltd. have raised the Philippines to an investment grade status, while Moody’s Investors Service had placed the country under review for a possible upgrade.