Sustained strong expansion of the Philippine economy prompted Japan Credit Rating Agency. Ltd to maintain its BBB+ rating, with stable outlook, on the country.
JCR’s current rating on the country was first given in July 2015 after the debt rater cited the government’s prudent fiscal management policy.
In a statement Thursday, the Philippines Investors’ Relations Office said JCR’s latest decision “recognized indicators that will help the economy maintain robust growth and withstand external headwinds.”
It said the outlook on the rating “means there are no pressing factors seen at the moment that may cause the rating to change at least over the short term.”
“JCR’s rating opinions are valuable for the Philippines as these help guide mostly Japanese companies in their investment decisions. Japan is one of the Philippines’ biggest sources of foreign direct investments, accounting for 48.8 percent of net equity FDI of USD2.035 billion in 2016,” it said.
Citing the JCR decision, the IRO said the rating affirmation was based on “the country’s high level of economic growth underpinned by expanding domestic demand, resilience to external shocks supported by declining external debt and accumulation of foreign exchange reserves, and continued reduction of government debt burden.”
The country’s growth has averaged to around 6.2 percent in the last five years from about three percent in the past.
JCR expects growth this year to be driven by household consumption, rising private-sector investments, and increasing government spending.
It also noted the country’s strong foreign exchange reserves.
Bangko Sentral data show that as of May 2017, the country’s gross international reserves reached USD82.07 billion.
It said the latest foreign reserves of the country is equivalent to 9.1 months’ worth of imports of goods and payments of services and primary income.
BSP Governor Nestor Espenilla, Jr. was elated over JCR’s latest decision.
“The rating and outlook assigned by JCR to the Philippines are a testament to the confidence it has on the economy and to the trust it bestows on the ability of concerned authorities to continue managing the economy well,” he said.
“As far as the BSP is concerned, we will continue doing our share for the economy by striving to consistently fulfill our mandate of price and financial stability. Included in this task is prudent management of the country’s external accounts so that the economy maintains sufficient buffers against external headwinds,” he added.
Finance Secretary Carlos Dominguez III, for his part, said the investment grade ratings on the Philippines “add to the plethora of positive assessments of the Philippine economy by local and foreign business groups and multilateral agencies under the leadership of President Duterte.”
He said the domestic economy “will stay on a path of robust growth, as JCR projected, and of making the growth more inclusive.”
He explained that “under the 10-point socioeconomic agenda of the Duterte administration, the government will spend much more on infrastructure and social services.”
The current government plans to spend at least P8 trillion for its infrastructure program, alone, in the next five years.
”Spending will be larger in the poorest areas of the country so that they can attract more job-generating investments and so that residents will have better chances of getting better quality jobs,” he said.
“All this will be done while observing fiscal discipline and remaining mindful of debt manageability,” he added.