Japan Credit Rating Agency Ltd. (JCR) has raised the Philippines’ investment grade rating a notch higher, citing growth in economic output that is sustainable at 6 percent in the coming years.
By raising the Philippine rating to BBB+ from BBB, the JCR has placed the country just a step away from the coveted “A” category or the highest rating from the Japanese institution.
The latest upgrade from the JCR constitutes the 22nd positive action for the Philippines by major international credit rating agencies since 2010.
“JCR is of the view that the Philippine economy will, by and large, sustain an annual growth of around 6 percent in the years to come, driven by strong domestic demand,” the rating agency said in a report released on Monday.
The report emphasized on the Philippines’ ability to maintain a sound fiscal position, high external liquidity, and solid economic growth.
It also cited the general stability in the political situation even as potential candidates have started positioning themselves for the presidential elections in 2016.
JCR noted a stable social situation while the government carved inroads in poverty reduction, noting that the poverty level fell from 28.6 percent in 2009 to 25.8 percent in the first half of 2014.
A “stable” outlook was assigned to the BBB+ rating, which means any adjustment is unlikely in the short term.
The upgrade reflects the third positive action for the Philippines from the JCR over the past five years.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said latest ratings decision appropriately reflects the strength of the economy.
“Inflation has remained low, the external liquidity ample, and the banking system is sound. These have been achieved despite a challenging external environment,” he said.
The upgrade to BBB+ recognizes partly how the transformation of the fiscal sector has evolved since 2010, Finance Secretary Cesar Purisima said.
“Fiscal reforms, both legislative and administrative, have resulted in more buoyant revenue collections, manageable deficits, and lower debt service burden. The pace by which the debt burden has declined over the years is one solid proof of the rare kind of fiscal discipline that the Philippines exercises,” he said.
The BSP Investor Relations Office (IRO), the contact point for credit-rating agencies, underscored the need for public vigilance to ensure that the Philippines keeps its hard-earned sovereign ratings beyond 2016.
IRO Executive Director Editha Martin said the Philippines has achieved unprecedented gains in credit standing over the past five years.
After suffering from speculative credit ratings not too long ago, the Philippines has emerged with a seal of good housekeeping from all the major credit rating agencies, Martin said.
“There should be no turning back. The need to maintain good governance—which boosts confidence of investors, creditors, rating institutions, and the general public—even after a change in leadership in 2016 cannot be overemphasized,” she added.