DOF targets ‘A’ credit rating by 2021

By Chino S. Leyco

The Duterte administration is aiming the Philippines’ credit rating to be at the “A” territory by 2021, the Department of Finance (DOF) said yesterday.

Finance Secretary Carlos Dominguez III / Manila Bulletin Finance Secretary Carlos Dominguez III

On the sidelines of the DOF anniversary celebration yesterday, Finance Secretary Carlos G. Dominguez III expressed confidence that the country would continue to climb the rating ladder during President Rodrigo R. Duterte’s term, which ends in the middle of 2022.

According to Dominguez, their target is to attain an “A” investment grade status in the next two years from the major international credit rating agencies, such as S&P Global Ratings, Fitch Ratings, Moody’s Investors Service, among others.

“That’s our target for the whole,” Dominguez told reporters when asked about the “A” rating by 2021. “Hopefully, that’s our target we will not rest on our laurels.”

To secure the “A” rating status, Dominguez vowed the national government would work on measures identified by S&P as key reforms the Duterte administration has to take to attain a much higher credit score.

Last week, S&P said “we may raise the ratings over the next two years if the government makes significant further achievements in its fiscal reform program, or if the country's external position improves such that its status as a net external creditor becomes more secure over the long term.”

“We may also raise the ratings if we find that the institutional settings in the Philippines have improved markedly,” the rating agency added.

The finance chief, however, assured that the current macroeconomics assumptions and targets, including the legislative programs, are aligned with the reforms the rating agencies expect of the Philippines.

“ it’s the same, we just push it harder,” Dominguez said.

Last week, S&P upgraded the Philippines’ investment grade credit rating status to “BBB+” amid the country’s above-average economic growth, healthy external position along with sustainable government finances.

“We raised the rating to reflect the Philippines' strong economic growth trajectory, which we expect to continue to drive constructive development outcomes and underpin broader credit metrics over the medium term,” S&P said.

“The rating is also supported by solid government fiscal accounts, low public indebtedness, and the economy's sound external settings,” the rating agency added.

S&P also noted the Duterte administration has “successfully carried over the constructive economic and fiscal policies of the previous government, and has adopted a more aggressive expenditure program to address the country's considerable infrastructure shortfall.”

Meanwhile, the Philippines’ Investor’s Relations Office said that the positive credit rating action by S&P is “a vote of confidence” and affirmed the country’s creditworthiness.

The upgrade from S&P follows sustained robust economic growth — which has consistently settled above the 6.0-percent mark for the last 15 quarters despite global economic challenges.

It comes after the continued exercise of fiscal discipline as the government invests more in much needed infrastructure and human capital development.

The upgrade recognizes implementation of vital policy and infrastructure reforms seen to fuel robust, sustainable, and more inclusive economic growth for the Philippines.

Major reforms include laws on tax reform, liberalization of the rice sector, and strengthening of the BSP’s charter, as well as initiatives to increase the ease of doing business and relax the foreign investment negative list.