by: Sarah Joson
Thursday, July 9, 2015 |
Improving stated finances, sound external balance sheet, stable political and social environment - with strong growth prospects are the key factors that pushed JCRA (Japan Credit Rating Agency Ltd.) to upgrade the Philippines to investment grade. The agency added that the growth is fuelled by strong household consumption which is said to be driven by remittances and rising capital investments.
The Tokyo-based credit rating agency recently stated that it has lifted the country’s credit score from the “BBB” grade it awarded since May 2013, to “BBB+”- putting the Philippines a step closer to JCRA’s “A” category.
Other debt watchers that have given the country investment grade rating are Fitch Ratings, Standard & Poor’s, Moody’s Investors Service, National Information and Credit Evaluation Ratings, Inc. and Rating and Investment Information, Inc.
JCRA pegs the economic growth of the Philippines at around six percent annually in the years to come as it is balanced out by strong domestic demand. Moreover, with the government’s efforts to improve tax collection while keeping its debts low, the country’s fiscal position could “improve moderately”.
However, JCRA warned that even with the positive outlook - ratings are still challenged by the country's unstable environment and lack of infrastructure. The debt watcher said the Philippines has to improve on these factors to boost and sustain economic growth. Moreover, JCRA said it will closely monitor the progress of the country's improvement.
For this year and 2016, the government is targeting a 7-8 percent growth. But, during the first quarter of this year, it posted the lowest growth in over three years at 5.2 percent due to flagging exports and poor government spending.
2013 was the country's banner year, growing at 7.2 percent, 6.8 percent during 2012, and a slow 6.1 percent last year.
Government officials accepted the upgrade, noting that it was because of the Philippines' strong macroeconomic fundamentals. Business groups, on the other hand, said reforms should be carried out to develop the country's business environment.
According to Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr., the upgrade from JCRA reflects the strength of the economy - adding that despite external risks, inflation has remained low, external liquidity is more than enough, and the country has a sound banking system.