Japan credit rater affirms PHL rating

THE JAPAN Credit Rating Agency (JCR) affirmed on Wednesday the Philippines’ credit rating at “A-” with a “stable” outlook, as it expects the government to maintain its fiscal soundness.

“The ratings mainly reflect the country’s high and sustained economic growth supported by solid domestic demand, a low-level external debt, its resilience to external shocks supported by accumulated foreign exchange reserves, and its solid fiscal base,” the credit rater said.

However, the Philippines needs to lower income disparity through rural and infrastructure development, JCR said.

“The fiscal consolidation being promoted by the Marcos administration, which took office in June 2022, based on the Medium-Term Fiscal Framework is producing good results. Hence, JCR believes that the government will maintain its fiscal soundness,” it said.

The credit watcher expects the country’s gross domestic product (GDP) to grow by 6% this year, slightly faster than the 5.6% GDP expansion in 2023 but below the government’s 6.5-7.5% target.

“JCR believes that the real GDP growth rate in 2024 will be around 6%, supported by a recovery of external demand and tourism demand, and solid private consumption underpinned by a subdued rise in prices and stable flow of remittances from overseas Filipinos,” it said.

It noted that the economy’s growth in 2023 was driven by strong private consumption, improved jobs market, strong remittances and infrastructure investments.

JCR also said economic growth will be driven by the Marcos administration’s infrastructure push. Under the “Build Better More” program. the government aims to spend 5-6% of GDP annually on infrastructure projects.

“Infrastructure investment to GDP is estimated to have reached 5.8% in 2023,” JCR said.

It also noted the first sovereign wealth fund, the Maharlika Investment Corp. (MIC), will support infrastructure investments in the country.

The JCR also said the Marcos administration has vowed to cut government debt to less than 60% of GDP by 2025, and the budget deficit to 3% of GDP by 2028 “through effective and efficient public spending.”

“The government debt-to-GDP ratio at the end of 2023 was approximately 60%, which is one of the lowest among the sovereigns rated in the A-range by JCR,” it added.

In a separate statement, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. welcomed JCR’s move to affirm the Philippines’ investment-grade credit rating.

“Our external payments position will continue to remain manageable, supported by sustained foreign exchange inflows from overseas Filipino remittances, business process outsourcing revenues, foreign direct investments, and tourism receipts. In addition, the country maintained ample foreign exchange reserves,” Mr. Remolona said. — AMCS