R&I maintains PH credit rating
Japanese debt-watcher Rating and Investment Information Inc. (R&I) has maintained the investment grade credit rating for the Philippines on the back of solid growth despite the prolonged pandemic.
In a statement, R&I said on Tuesday, April 19, that it affirmed the country’s foreign currency issuer rating at “BBB+”—two notches higher than the minimum investment grade—with a “stable” outlook.
“The Philippines economy has been demonstrating solid growth since the second quarter of 2021 despite the new wave of Covid-19 infections,” R&I said. “The government debt ratio is expected to stabilize in the near-term in tandem with the country's economic recovery.”
“While the current account deficit will likely stay slightly elevated, the country's dependence on external debt remains limited, backed by robust foreign direct investments. Moreover, the banking sector remains stable,” it added.
In 2021, the economy, as measured by gross domestic product (GDP), expanded by 5.7 percent. For this year, the government projects seven percent to nine percent growth.
However, R&I said a surge in crude oil prices is anticipated to push inflation up this year, which is considered a short-term risk factor.
R&I also noted the government’s rising debt stock, which is expected to peak at slightly over 60 percent of GDP this year.
The national government incurred a budget deficit of 7.6 percent of GDP last year owing to the impact of the Covid-19 pandemic and policy actions.
As a result of fiscal spending to shore up the economy, the year 2021 also saw a rise in the fiscal deficit to 8.6 percent of GDP.
While the government intends to press ahead with fiscal consolidation from 2022, it projects a 7.7 percent deficit, almost the same level as the 2020 outturn.
“The government aims to improve the deficit gradually, not hastily, while continuing infrastructure investment with an eye on other fiscal indicators including the debt ratio,” R&I said.
Meanwhile, R&I expects a new policy framework to be announced when a new president assumes office at the end of June.
"R&I will keep an eye on the new administration's policies, particularly on continuing key infrastructure projects and structural reforms, which are deemed essential in attracting investments from both domestic and external sources,” the rating agency said.