Malaysia-based RAM Ratings has upgraded the Philippines’ credit rating outlook to “positive” on the back of the Duterte administration’s push for the comprehensive tax reform to boost its ambitious infrastructure program, the government’s Investor Relations Office (IRO) said.
Based on a statement from IRO on Monday, RAM upgraded its outlook from “stable” previously because of “stronger-than-expected GDP (gross domestic product) performance in 2016 and growing FDI (foreign direct investment) despite a change in administration.”
The GDP expanded by 6.9 percent last year, making the economy among the fastest-growing in the region.
FDI, meanwhile, reached a record $7.933 billion last year.
“A ‘positive’ outlook means that the Philippines’ existing global scale rating of BBB3 and regional scale rating of A1 from RAM have chances of getting upgraded over the short term,” the IRO explained.
Credit ratings are a measure of a government’s credit-worthiness. As the stability of state finances is also related to a country’s performance, credit scores serve as a proxy grade for the economy.
The IRO said RAM “recognized vast accumulation of official reserve assets, which lends support to the country’s external payments position, the government’s efforts to broaden its revenue-generating capacity while making the tax regime more progressive, and the pace of infrastructure spending that is anticipated to be faster than in the previous administration.”
For RAM, “sustained momentum of robust economic growth, rising FDI, as well as successful implementation of tax reform and roll out of key infrastructure projects may lead to actual upgrade of the global and regional ratings of the Philippines,” the IRO added.
The IRO said the upgraded outlook was a vote of confidence for the Duterte administration, albeit it was currently in a deadlock with the Senate over the tax reform bill.
Bangko Sentral ng Pilipinas Governor Nestor A. Espenilla Jr. said the BSP “will continue to target low and stable inflation, prudently manage the country’s external accounts, and observe sound banking supervision, in addition to implementing major financial sector reforms to complement government efforts toward the goal of a more inclusive, upper middle income economy.”