The Japan Credit Rating Agency Ltd. (JCR) affirmed the Philippines’ credit rating, but it expects a slow pace economic recovery this year due to the rapidly spreading Delta variant.
In a statement, JCR said Monday, Sept. 6, that it maintained the credit rating for the Philippines at ‘A-’ with a stable outlook, reflecting its high and sustainable economic growth performance underpinned by solid domestic demand.
JCR also cited the country’s resilience to external shocks supported by a low foreign debt level relative to gross domestic product (GDP), accumulation of foreign exchange reserves, the government’s solid fiscal position, and a sound banking sector.
However, JCR said recovery of economic activities is delayed “at the moment” following the reimposition of stricter mobility restrictions due to the resurgence of the COVID-19 including the Delta variant.
“The economic growth in 2021 may prove slow at four to five percent due to the resurgence of the pandemic since the middle of the year,” JCR said.
But once the pandemic gets subdued, JCR said the country's “potential growth will recover and the economy is expected to return to a high growth path.”
On government finances, JCR said it does not consider that its fiscal soundness will be impaired owing to a wider budget deficit.
“The support package at this time is backed by appropriate fiscal policies and the government debt will remain comparatively subdued,” the rating agency said.
Before the COVID-19, the government had promoted a policy aimed at fiscal soundness by keeping the budget deficit to about three percent of GDP, but it widened to 7.6 percent last year.
Meanwhile, Finance Secretary Carlos G. Dominguez III thanked JCR for seeing through the short-term challenges confronting the Philippines and recognizing the government’s scaled-up efforts to put the economy back to its high-growth path.
“Such recovery programs include the faster COVID-19 vaccination deployment; accelerated infrastructure development; and continued push in the Congress for further reforms to super-charge the economy and modernize taxation,” Dominguez told reporters.
The finance chief added that the government is also aiming to achieve a strong and quick economic recovery through sustained spending on priority programs and productive investments while maintaining deficit and debt manageability.
“We are not passing on unsustainable debts to future generations, even as we continue to spend more on pandemic response and on economic recovery to ensure robust medium- and long-term growth prospects for the Philippines,” he said.