Malaysian debt watcher raises PH credit rating, but warns of Duterte flap

A strong external position coupled with robust domestic demand and a smooth transition to a new administration allowed Malaysian debt watcher RAM Rating Services Berhad to raise the Philippines’ credit rating relative to its Asean peers.

While RAM Ratings affirmed the Philippines’ global credit rating at the minimum investment grade of “BBB3” with a stable outlook, the country’s Asean rating, which reflects its performance vis-à-vis other Southeast Asian countries, was raised by a notch to “A1,” also with a stable outlook.

In a report published this month, RAM Ratings said the upgraded Asean credit rating of the Philippines reflected “impressive progress in the enactment of key legislative and administrative reforms as well as the country’s resilience, especially its ability to withstand external volatilities that compare favorably to Asean peers.”

“Despite a slower pace of growth in workers’ cash remittances, domestic private consumption expanded further. The country also weathered a bout of financial volatility in 2015 relatively well,” it said.

The Philippines, however, should still address prevailing structural issues such as high underemployment and poverty rates, which were considered long-term constraints to growth, it said.

The report noted of a smooth transition to the Duterte administration, which RAM Ratings nonetheless said has been sending “mixed messages” with regard to foreign policy.

“Continuity of current reforms and development plans that began during the tenure of the last administration is paramount to bolster investor confidence. Current mixed messages with regard to international relationships could raise policy uncertainties to some degree,” it said.