Japanese rating agency affirms RP foreign currency issuer rating

MANILA, Philippines - Rating and Investment Energy Inc. (R&I), a Japanese credit rating agency, has affirmed its foreign currency issuer rating on the Philippines of BBB-, noting the resilience of the Philippine economy.

It also changed its rating outlook to stable from positive.

A BBB- rating means that the issuer’s credit worthiness is sufficient though some factors require attention in times of major environmental changes.

R&I’s action followed Thursday’s ratings upgrade by Moody’s Investors Service, which also noted the resilience of the economy in the face of the global financial crisis.

“The probability that real gross domestic product (GDP) will slip into negative growth in 2009 appears to be low,” R&I said.

It noted that in the second half of the year, the government has boosted fiscal spending in response to an economic slowdown.

The Japanese debt watcher also said that remittances from overseas Filipinos have become a significant factor influencing personal consumption.

“Overseas Filipino remittances have not declined, even during 2009, and total remittances from January through May actually increased 2.8 percent compared with the same period of the previous year,” R&I said.

Overall, R&I said the Philippine economy is likely to remain in positive territory despite the meager 0.4 percent growth in the first quarter of the year.

However, R&I noted that the Arroyo administration’s progress has been slow in the area of restoring the country’s fiscal health.

“R&I has evaluated positively the course charted until now by the government under the Arroyo administration to restore fiscal health, including expansion of the tax revenue base, even though the progress has been slow. It will be necessary, however, to see whether the administration that takes office after Arroyo also pursues a course to fiscal health, and to follow the trend of the Philippine economy,” R&I said.

The country’s economic managers welcomed the positive news.

“This is another vote of confidence on the fundamentals of our economy, coming at a time of the worst global financial crisis and the most severe economic downturn in decades,” BSP Governor Amando Tetangco Jr. said yesterday.

Budget Secretary Rolando Andaya Jr. said that the actions of R&I and Moody’s open up more options for the government to fund its spending program including the Samurai bonds should the government need it.

For his part, Socioeconomic Planning Secretary Ralph Recto said the rating affirmation by R&I is a “bonus” during these difficult times.

Finance Secretary Margarito Teves said R&I’s assessment should further boost confidence that the Philippine economy will be able to hurdle the current global financial and economic crisis.