The Philippines deserves a better credit standing with international debt watchers, and the latest move by Fitch Ratings to assign a ‘positive’ outlook on the country’s economic prospects is a step toward that end.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno made the statement to stress that the government was focused on implementing the structural reforms needed for the much-coveted ‘A’ rating from foreign rating agencies.
“We deserve a credit rating upgrade from Fitch, and the ‘positive’ outlook should soon lead us there,” he said in a statement.
He said part of the “Road ‘A’ agenda” was to let the world know about “economic milestones as well as governance and institutional strengthening” achieved by the Philippines in recent years.
Diokno said the Duterte administration’s economic team is also meticulously tracking how the economy is progressing in terms of achieving a wide array of metrics that will solidify its position as an ‘A’ rated economy in two years.
He said, however, that an A rating is “not an end in itself.”
“The overarching objective,” Diokno added, is “maintaining macroeconomic stability and making growth truly inclusive.”
But an A rating “will place the Philippines in the radar of more investors, which bodes well for attracting more job-generating investments,” the BSP chief said.
To reach A rating, Diokno said it was urgent to pass structural reforms in the next two years to improve the Philippines’ institutional strength to manage the economy, a key indicator for credit rating agencies.
The BSP chief noted that Fitch Ratings raised the outlook on its BBB investment grade credit rating for the Philippines from “stable” to “positive” less than a week after Japan-based Rating and Investments Information Inc. upgraded the country’s rating from BBB to BBB+.
These followed the upgrade from Standard & Poor’s last year.
“I believe that we are moving towards the right direction towards our goal of receiving an ‘A’ rating, which is seen to have a vast positive impact on the local economy,” he added.
Securing an A credit rating translates to lower borrowing costs and favorable investment environment which support economic growth.
According to the BSP, reforms that support the “Road to A” initiative include the Corporate Income Tax and Incentives Rationalization Act and Passive Income and Financial Intermediary Tax; amendments to the Anti-Money Laundering Act of 2001 and the Human Security Act of 2007; amendments to the Agri-Agra laws; and reforms in financial consumer protection and deposit secrecy.
Edited by TSB