PH gets rating upgrade from Japan agency

The Philippines’ image before foreign creditors was again boosted Tuesday after the Japan Credit Rating Agency Ltd. (JCR) announced that it had raised its rating for the country by a notch from the minimum investment grade of BBB- to BBB.

The credit watchdog gave a “stable” outlook on the rating, which indicated that the rating was likely to remain the same over the short term, barring any unexpected developments affecting the country’s economic fundamentals.

In a statement, JCR said its decision was anchored on the country’s encouraging fundamentals, including the government’s improving fiscal situation, healthy pace of economic growth, rising foreign-exchange reserves and political stability that was supportive of investments.

These fundamentals were believed to have made the country capable of meeting its obligations to creditors.

“The JCR is of the view that the Philippine economy will, by and large, sustain an annual economic growth at around 6 percent in the years to come supported by strong domestic demand,” it said.

The credit watchdog said the country’s growth prospects were supported by the continued growth in remittances, which supported the consumption of many Filipino households.

JCR also cited its outlook on the Philippine government’s fiscal situation, saying the government had the potential to achieve the target of keeping the budget deficit at 2 percent of the country’s gross domestic product (GDP).

“The Aquino administration has been steadfast in upholding a prudent fiscal management policy,” JCR said.

JCR also noted that rising foreign-exchange reserves, currently at nearly $84 billion, gave comfort about the country’s ability to meet its liabilities. The reserves are boosted by remittances and foreign investments in the business process outsourcing (BPO) sector.

“Enhanced resilience to external shocks rendered by accumulated foreign exchange reserves, the Philippines has managed to register a current account surplus by offsetting its trade deficit with surpluses in the transfer and services accounts brought mainly by solid gains in OFW remittances and BPO revenues,” JCR said.

The decision of JCR to raise its rating for the country followed similar moves of two of the three biggest international credit-rating agencies—Fitch Ratings and Standard & Poor’s—to give the Philippines investment-grade credit ratings. The two cited the same reasons noted by JCR.

The Philippines is now waiting for Moody’s Investors Service to give the Philippines an investment rating as well. Moody’s rates the Philippines a notch below investment grade.