By Joann Santiago
MANILA, July 9 (PNA) — Japanese debt watcher Rating and Investment Information Inc. (R&I) on Wednesday upgraded a notch its investment grade long-term foreign currency issuer rating on the Philippines to BBB with “stable” outlook from BBB- on back of increase in infrastructure investments and sustained implementation of reforms.
In a statement, the credit rating agency cited the continued strengthening of the Philippine economy, the low inflation rate, and lesser fears on the government’s fiscal position.
It cited that “amid heightened reform momentum, infrastructure and industrial development, which were pending issues, are likely to progress.”
”This should allow for relatively high growth and raise per capita income levels steadily,” it said.
The debt watcher also maintained it’s a-2 short-term debt rating for the country “which indicates high certainty that short-term financial obligations would be paid. “
“The Philippines’ economy continues to show strong growth, thanks to brisk investment coupled with private consumption driven by remittances from overseas Filipinos,” it said.
In 2013, the domestic economy surpassed expectations after expanding by 7.2 percent, higher than the government’s six to seven percent growth target amid negative external environment and the disasters that hit the country in the last quarter of 2013.
Also, fiscal situation continue to improve with the budget deficit in end-December staying below the P238 billion ceiling after it only totalled to Php164.1 billion. This is 31 percent lower than the Php242.8 billion deficit in 2012.
R&I said these improvements in the Philippines “should allow for relatively high growth and raise per-capita income levels steadily.”
It noted that per capita income in the country remains low compared to other Asian countries but it has been increasing.
In 2009, per capita income in the Philippines is about USD 3,684 but it has increased to USD 4,649 in 2013.
This is expected to further increase because of the public-private partnership (PPP) initiative of the government, which is also expected to help increase investments.
Also, R&I said improvements in fiscal situation, due to fiscal consolidation “help the government to finance infrastructure projects.”
”Budget execution is also expected to accelerate,” it said.
The government has awarded seven projects under the PPP program and these include the P17.5 billion Mactan Cebu International Airport expansion project, the P2.01 billion Daang Hari-SLEX Link Road Project and the P15.52 billion NAIA Expressway Project.
R&I also believes that the fiscal reform is a plus factor for the Philippines and this can be sustained beyond the term of the Aquino administration, which will end in the first half of 2016.
“There is risk that the next government will not be as reform-minded as the Aquino administration. However, pressures from growing international relationships, such as the establishment of the ASEAN Economic Community in 2015, along with public expectation for sustained reform initiatives, should deter the post-Aquino government from going backwards,” it said.
The upgrade made by R&I is the second for the country this year after Standard and Poor’s (S&P) upgraded the country’s investment grade rating a notch to BBB with “stable outlook” from BBB- a year after the debt watcher elevated the country to investment grade.
Aside from these two rating agencies, the Philippines also holds investment grade ratings from Moody’s Investors Service, Baa3 with positive outlook; and Fitch Ratings, BBB- with “stable outlook.”
The R&I upgrade was welcomed by economic managers who said that this serves as another proof on the country’s strength and sustained expansion.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said this latest development on the country’s credit standing is a recognition of a host of favorable macroeconomic indicators, particularly an inflation outlook that is conducive for business and the stability of the financial system amidst a difficult operating environment.”
“The upgrade is an expression of confidence, in part, on the ability of the Monetary Authority to implement appropriate and timely measures that ward off threats to the economic stability we are enjoying. The BSP will continue to craft policies that will help maintain this stability,” he added.
Also, Finance Secretary Cesar Purisima said “reforms that this government has started to institutionalize help ensure that the positive momentum will not falter.”
“On the fiscal front, administrative and policy reforms implemented by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) will make it easier in the future to keep the growth trend in public revenues,” he added.
Relatively, Investor Relations Office (IRO) Executive Director Editha Martin said the upward adjustment in the country’s credit-ratings scale is a big help to make the Philippines a favoured investment destination.
“It is always good to have institutions outside the government point out the strengths of the Philippine economy. The string of credit-rating upgrades that the country has secured in recent years makes it difficult for investors not to notice the Philippines,” she added. (PNA)