JAPAN-BASED Rating and Investment Information Inc. (R&I) on Monday upgraded its outlook on the Philippines from stable to positive while affirming the country’s BBB+ credit rating due to its improving economic performance despite global “uncertainty.”
In a news release, R&I explained that it improved its outlook on the Philippines on the back of various economic and political factors.
For one, the R&I said the country’s fiscal deficit is “improving” with its government debt ratio expected to “start declining” this year.
“The current account deficit which had widened due to import surge is expected to shrink and the external debt remains under control. In addition, the banking sector continues to be sound and stable,” it said on Monday.
The debt watcher also cited the high approval rating of President Marcos Jr. in “maintaining a stable political environment.”
“Based on said recognition, R&I has affirmed the Foreign Currency Issuer Rating at BBB+ and changed the Rating Outlook to Positive,” the R&I said.
The R&I said it stands ready to upgrade the Philippines’s credit rating once the national government attains the goals under the Philippine Development Plan 2023-2028, which includes economic growth, “stable” macroeconomic condition and “improving trend” of fiscal position.
“Eyes are on government efforts to see whether they can achieve the economic and social transformation that the administration is aiming for,” it said.
Finance Secretary Benjamin E. Diokno said the R&I’s latest report brings the Philippines closer to the national government’s goal of attaining an A rating during Marcos Jr.’s term. Diokno noted that the BBB+ rating is one notch below the A- rating.
“We are firmly on track to our ‘Road to A’ and remain committed to further improving the country’s investment climate through structural reforms to enhance the quality and pace of infrastructure development,” Diokno said in a statement on Monday.
Diokno reiterated the government’s commitment to fiscal consolidation through the country’s Medium-Term Fiscal Framework to attain the elusive A rating for the Philippines.
“This will be implemented alongside the strategies outlined in the PDP 2023-2028 to reinvigorate job creation and accelerate poverty reduction by steering the economy back on a high-growth path,” he said.
In its report, the R&I said private consumption in the Philippines, a major driver of the economy, will “likely” remain strong “despite strong expectations of slower exports due to weakening global demand.”
Furthermore, the R&I said it will not “take a negative view” regarding the national government’s current account deficit, explaining that “increased imports stemming from infrastructure investment will lead to economic growth in the future.”