Philippines gets surprise credit upgrade

by Lawrence Agcaoili (The Philippine Star), 12 Jun 2020

MANILA, Philippines — The Philippines achieved a credit rating of A after Tokyo-based Japan Credit Rating Agency (JCR) upgraded the country’s credit rating to A- from BBB+ to reflect the resilience of the economy amid the coronavirus disease 2019 or COVID-19 pandemic.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the upgrade and stable credit outlook from JCR is encouraging news in this challenging time.

“The agency’s decision reflects its confidence that the Philippines is pursuing appropriate policies that will help Filipino individuals, businesses and the economy at large to recover from this unprecedented crisis. On the part of the BSP, we have already implemented a long list of extraordinary relief measures, and we stand ready to do more if needed,” Diokno said.

The credit rating upgrade from JCR bodes well for the Philippine government’s fund-raising activities, which in recent years have included regular issuance of Samurai bonds. The investment guidelines of many Japanese institutional investors allow them to invest if JCR assigns an A- rating or higher.

Improvements in the country’s investment grade ratings help the government to easily access funding at favorable costs and help boost overall investor perception on the Philippines.

The savings generated from cheaper borrowings allow the government to spend more of its resources for much needed social services, such as health care and education, as well as in job-generating infrastructure projects.

The BSP chief said the country’s “Road to A” initiative took a backseat as the government focuses on saving lives and helping the economy survive the impact of the global virus outbreak.

“While we have temporarily veered our attention away from the Road to A agenda because our focus Phl gets at the moment is on saving lives, jobs, and livelihoods, we welcome positive assessments from international observers like JCR. We hope this helps to uplift the Filipino spirit at this trying time and to inspire us to work harder together to emerge stronger after the pandemic,” Diokno added.

JCR said on Thursday its decision to raise the Philippines’ credit rating came on the back of its assessment that the impact of the COVID-19 crisis on the economy and the government’s fiscal standing will be temporary given the country’s strong fundamentals going into the crisis, the massive relief measures, as well as the pursuit of important legislation, such as the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

“JCR holds that a downturn will be limited given the country’s strengthened economic base, resilient external position, and the government’s economic stimulus package totaling more than nine percent of GDP. JCR also considers that the fiscal soundness will not be impaired because while the fiscal deficit may widen, the package at this time is justifiable and the government debt will remain comparatively subdued,” the debt watcher said.