Japan debt watcher sees resilient PH economy

MANILA, Philippines — The Japan Credit Rating Agency (JCR) said the Philippine economy is likely to remain highly resilient to external shocks despite mounting tariff pressures, citing the country’s strong foreign exchange buffers and potential to diversify export markets.

“Given its solid foreign currency liquidity position, JCR believes that the Philippines will remain highly resilient to external shocks. This resilience is further supported by the relatively limited exposure of Philippine exports to the new US tariffs, with more than 60 percent of exports to the United States remaining exempt from the additional duty,” JCR said.

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“Market access is also broadened by 23 free trade agreements in force or under negotiation, helping diversify export markets and reduce reliance on any single trading partner,” it added.

JCR in August retained its “A-” investment-grade rating with a stable outlook on the Philippines, citing the country’s strong external buffers. It also expects economic growth to settle in the mid-3 percent range this year.

The credit rater noted that gross international reserves remained above the $100-billion mark at $104.8 billion as of the end of August.

The reserves, however, fell to a three-year low of $99.5 billion at the end of eptember. Also, the balance of payments posted a $3.14-billion deficit, the largest in more than a year.

Despite the decline, reserves remained enough to cover 6.2 months’ worth of imports of goods and payments of services and primary income, as well as 3.1 times the country’s short-term external debt based on residual maturity.

Meanwhile, the national government has also been pushing to conclude several free trade agreements before the end of the year, with negotiations with the European Union and Canada targeted for completion by November, while an agreement with Chile could be signed in October or November.

The government also aims to conclude the first revision of the Philippines-Japan Economic Partnership Agreement by November.

“The government is working to improve the investment environment and promote industrial upgrading, and JCR expects the economic growth rate to pick up again over the medium term. Although the current account deficit persists, it is partially offset by net inflows of direct investment,” JCR said.

“The foreign exchange reserves are also kept at a high level, and resilience to external shocks remains strong. The government is proceeding with gradual fiscal consolidation based on its medium-term fiscal framework, and fiscal soundness is expected to be maintained to a certain extent,” it added.

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In a statement, the Bangko Sentral ng Pilipinas welcomed the favorable assessment, saying the credit rater’s report reflected confidence in the Philippine economy.

“JCR’s recognition of the country’s strong external buffers reflects confidence in the Philippine economy’s ability to weather global headwinds, including those arising from the Middle East conflict,” BSP Governor Eli Remolona Jr. said.

“The BSP will continue to manage the country’s foreign exchange reserves prudently to help safeguard economic stability,” he added. INQ