‘RATING REFLECTS PH EVIDENCE- BASED MONETARY POLICY, INVESTOR CONFIDENCE’
The Bangko Sentral ng Pilipinas (BSP) said the affirmation by Japan’s R&I of the Philippines “A-” credit rating with a stable outlook reflects the effectiveness of the government’s “agile and evidence-based monetary policy” in stabilizing inflation.
BSP Governor Eli Remolona Jr. said that in line with its financial stability mandate, the BSP continues to strengthen the Philippine banking system.
“These enable banks to finance productive economic activities while navigating a fast-evolving global economic landscape,” he said in a statement on Thursday.
The BSP said R&I’s move is consistent with those of other international credit rating agencies.
Earlier this year, Japan Credit Rating Agency and Fitch Ratings affirmed their “A-” and “BBB” ratings, respectively, on the Philippines, both with a stable outlook. S&P Global Ratings revised its outlook on the country to positive in late 2024.
‘Low risk’
The BSP said an investment-grade rating is an indication of a country’s low credit risk, which helps reduce borrowing costs.
“This enables a country to allocate more funds to socially beneficial initiatives and programs,” it said.
Potential future expansion
Although the country’s current account remains in deficit, largely due to higher imports of construction materials and other capital goods, R&I said this reflects the government’s infrastructure program and potential for future expansion.
“Despite the current account mostly in deficit, the stability of items in surplus is maintained including the steadily increasing remittances,” R&I said.
It further noted that strong overseas Filipinos’ remittances and adequate foreign exchange reserves will keep external risks “limited.”
Recto sees investor confidence in PH
Finance Secretary Ralph Recto highlighted the confidence by credit rating agencies and investors in the country as reflected by the latest rating decision by R&I.
“This is [another] success that every Filipino should celebrate. Because it means that credit rating agencies and investors remain confident in us. So more investments will come in, more good jobs will be created, more income will increase, and we will be able to lift more Filipinos out of poverty,” Recto said in a statement.
Given higher revenue collections and improving expenditure management, the country’s fiscal deficit dropped from a pandemic high of 8.6 percent in 2021 to 5.5 percent in 2025. It is expected to decline to 4.3 percent by 2028 and about 3 percent by 2030.
The government is managing the debt level by prioritizing domestic, long-term and fixed-rate borrowings. The borrowing mix will continue to favor local sources to temper foreign exchange risks.
Recto said earlier the government would stick to its sticking to its refined mid-term fiscal program, which should boost the economy’s expansion to P42.6 trillion by 2030 while keeping debt at a manageable level at P24.7 trillion, or about 58 percent of GDP.
Credit rating pillars
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the latest affirmation of the country’s credit rating is a good sign of international investor confidence in the country’s economic fundamentals.
He said a credit rating is the basis for foreign direct and portfolio investors to assess the country before investing and for creditors before lending, allowing for lower borrowing costs and better terms.
Ricafort identified the pillars of the country’s credit ratings as:
- GDP growth (among the fastest in Asean and Asia amid favorable demographics)
- Strong external position with the Gross International Reserves (GIR) at more than seven months’ worth of imports
- Effective monetary policy and benign inflation
- Manageable fiscal management and performance
