Japan’s leading credit agency yesterday gave the Philippines its first ‘A’ level rating “amid a pandemic that has slowed down growth, impaired fiscal positions and hurt credit ratings of economies across the globe.”
Japan Credit Rating Agency (JCR) upgraded the Philippines’ credit rating by a notch from BBB+ to A- with a stable outlook, which indicates that the current rating will be maintained over the near term.
JCR said its decision to raise the Philippines’ credit rating came on the back of its assessment that the “impact of the COVID-19 crisis on the domestic economy and the government’s fiscal standing will be temporary, given the country’s strong fundamentals going into the crisis, the massive relief measures, as well as the pursuit of important legislation.”
“(We) hold that a downturn will be limited given the country’s strengthened economic base, resilient external position, and the government’s economic stimulus package totaling more than 9 percent of GDP. (We) also consider that the fiscal soundness will not be impaired because while the fiscal deficit may widen, the package at this time is justifiable and the government debt will remain comparatively subdued,” JCR said.
JCR is the only Japanese rating agency that is also officially registered in the United States and certified in the European Union. Its ratings services cover over 60 percent of the estimated 1,000 publicly traded issuers in Japan and over 200 foreign issuers, including 36 sovereigns.
Benjamin Diokno, Bangko Sentral ng Pilipinas (BSP) Governor, said an A- rating to the Philippines is “encouraging news at this challenging time.”
“The agency’s decision reflects its confidence that the Philippines is pursuing appropriate policies that will help Filipino individuals, businesses, and the economy at large to recover from this unprecedented crisis. On the part of the BSP, we have already implemented a long list of extraordinary relief measures, and we stand ready to do more if needed,” Diokno said.
JCR expects the Philippine economy to bounce back with a growth anywhere between 6 and 7 percent in the medium term following an anticipated contraction this year due to the effects of COVID-19.
JCR likewise recognized the stability of the banking sector, noting that the average capital adequacy ratio of banks in the country stand at a comfortable 15 percent.
It also cited the country’s manageable external debt balance (which was kept low at 22.2 percent of GDP as of end-2019) and the robust foreign currency reserves.
The rating upgrade from JCR came following the decision of Fitch to affirm the BBB rating it assigns to the Philippines, and the move of S&P Global to affirm the country’s BBB+. Both investment grade ratings have a “stable” outlook.