MANILA, Philippines — A Japan-based agency has affirmed the Philippines’ credit rating on the back of stable financial system and positive economic outlook, as well as “diminishing” risk of diplomatic ties dampening the economy under the Duterte administration.
In a statement, Research & Investment (R&I) Rating, Inc. on Tuesday kept the Philippines’ foreign currency issuer rating at “BBB” — a notch above minimum investment grade — with a “stable” outlook.
Its short-term debt rating also remained “a-2.”
R&I said President Rodrigo Duterte's aggressive infrastructure program is expected to help boost the economy, adding that anticipated widening of fiscal deficit and another current account deficit would “unlikely be a major disturbing factor.”
The president’s shift to a “more realistic and pragmatic stance over time” regarding his country’s diplomatic relations has also helped allay concerns over possible economic ramifications of the firebrand leader's style of diplomacy.
Nonetheless, R&I said the way the Bangko Sentral ng Pilipinas would manage inflation pressure from tax reforms, higher oil prices and the weaker currency, as well as from buoyant domestic demand, consumer price trends “would draw our attention.”
“The Rating Outlook is Stable, because at present there are few factors that will exert downward pressure on the sovereign's creditworthiness,” R&I said.
“R&I will keep an eye on whether solid economic growth will bring about a steady rise in income levels,” it added.
"If managed within the target range of 2-4%, however, inflation will not be a drag on the economy, in R&I's view. Eyes are on the BSP's handling in inflation control while preserving economic growth momentum."
Credit ratings are a measure of a country’s willingness and ability to pay debts as they fall due.
Debt watcher Fitch Ratings last week announced it has upgraded the Philippines’ sovereign credit rating to “BBB” from the minimum investment grade of “BBB-” due to sustained macroeconomic fundamentals and strong investor confidence in the country.