The Marcos administration secured its first credit rating upgrade from Japan-based Rating and Investment Information, Inc. (R&I), the Department of Finance (DOF) said.

In a statement on Wednesday, Aug. 14, the DOF announced that the Japanese debt watcher raised the country’s credit rating to “A-“ with a stable outlook from “BBB+.”

“This is a milestone achievement,” Finance Secretary Ralph G. Recto said.

“Ito ang kauna unahang credit rating upgrade sa ilalim ni President Ferdinand R. Marcos, Jr. na nagpapatunay na malaki ang tiwala ng mga investors and creditors sa kanyang pagpapatakbo sa ekonomiya,” the finance chief added.

[This is the first credit rating upgrade under President Ferdinand R. Marcos, Jr., which proves that investors and creditors have a high level of confidence in his management of the economy.]

This is not the first time the Philippines has achieved an "A" status; R&I's peer, the Japan Credit Rating Agency, Ltd. (JCR), already rated Manila since 2020 with an "A-" with stable outlook. 

However, among the three major credit rating agencies—Moody's Investors Service, Fitch Ratings, and S&P Global Ratings—the Philippines has yet to attain an "A" rating.

Recto stated that the Marcos administration is committed to achieving an “A” credit rating from one of the three major rating agencies before its term concludes in 2028.

“Our refined Medium-Term Fiscal Program is our blueprint for our road to A rating. This ensures that we can reduce our deficit and debt gradually in a realistic manner, while creating more jobs, increasing our people’s incomes, growing the economy further, and decreasing poverty in the process. Sticking to this program can help us get there faster,” Recto said.

The high credit rating of the Philippines sends a strong message of trust to investors and lenders, leading to reduced and more efficient borrowing costs for both the government and the private sector.

This enables the government to allocate funds that would have been used for interest payments to other development initiatives such as increased infrastructure projects, enhanced social services, improved healthcare, and quality education.

Furthermore, it entices more international investment into the country, ultimately resulting in improved employment prospects for Filipinos.

The recent upgrade has enabled the Philippines to attain two A- ratings, the first of which was awarded by JCR in 2020. The country has effectively upheld its high investment-grade standing across all major regional and international debt rating agencies.

In its report dated Aug. 14, the R&I cited the Philippines’ macroeconomic stability, high economic growth path, and continuous improvement in fiscal balance as key factors for the rating upgrade.

In particular, the R&I recognized that the Philippine government has been pursuing fiscal consolidation efforts while also emphasizing support to economic growth.

“The government has higher budget allocation for education and, social welfare, on top of infrastructure investment, while pushing ahead with the measures aimed at expanding tax base,” the R&I said. 

The Japanese debt-watcher believes that the country’s fiscal deficit and central government debt as a share of GDP will continue to decline from its peak during the pandemic, emphasizing that its debt remains affordable given manageable burden of interest payment.

The R&I also highlighted that the Philippine economy has been exhibiting fast growth among the major economies in Southeast Asia.

It projects economic growth to remain strong and stable over the medium and long term on the back of robust public and private sector investments, development of domestic business sectors such as business process outsourcing (BPO), and favorable demographics, among other elements.

The agency acknowledged the Marcos, Jr. administration’s strong push for reforms and programs to secure economic stability, accelerate infrastructure development, expand private investments, and create employment with the end goal of improving household income and accelerating poverty reduction. 

“Given that the government has been pushing ahead with measures to ease regulations to boost private investments, R&I has a high opinion of the firm progress the government has made in further building the fundamentals toward economic growth in the medium to long term,” the report said. 

The Philippine government has maintained regular dialogue with the R&I and other major credit rating agencies. The economic team recently met with R&I on June 20, 2024 in Tokyo, Japan to provide a comprehensive briefing on the Philippine economy.