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April 12, 2024

Stable outlook for Philippines: Japan agency confirms ‘A-‘ credit rating

The Japan Credit Rating Agency Ltd. (JCR) has maintained the country’s investment-grade credit rating at “A-” with a stable outlook, citing “high and sustained economic growth supported by solid domestic demand.”

The Japan-based debt watcher also highlighted the country’s resilience to external shocks, attributed to its low external debt, accumulated foreign exchange reserves, and a solid fiscal base, as key strengths.

JCR noted that the government’s debt-to-gross domestic product (GDP) ratio at the end of 2023 was approximately 60 percent, one of the lowest among the sovereigns rated in the A range.

The domestic economy grew by 5.6 percent in 2023, surpassing major economies in Asia. China posted a GDP growth of 5.2 percent, Indonesia at 5.1 percent, Vietnam at 5.1 percent, Malaysia at 3.7 percent, and Thailand at 1.9 percent.

JCR expects the country’s real GDP to expand by around 6.0 percent in 2024, supported by a recovery in external and tourism demand, as well as solid private consumption underpinned by a subdued rise in prices and a stable flow of remittances from overseas Filipinos. The credit rating agency also remarked on the robustness of the country’s foreign currency liquidity position.

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. RemolonaJr. welcomed JCR’s recognition. “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. Additionally, the country has maintained ample foreign exchange reserves.”

According to BSP’s preliminary data, the country’s gross international reserves remained healthy at $103.3 billion as of the end of January 2024. This figure represents a liquidity buffer equivalent to 7.7 months’ worth of imports of goods and payments for services and primary income.

The credit rating agency believes that the Philippine government will maintain its fiscal soundness, as the fiscal consolidation being promoted by the administration of President Bongbong Marcos is producing positive results, based on the Medium-Term Fiscal Framework.

An investment-grade rating indicates a lower credit risk, thus allowing a country to access funding from development partners and international debt capital markets at a lower cost. This enables the government to allocate funds, which would have otherwise been earmarked for interest payments, to socially beneficial programs and projects.