Wednesday, May 08, 2013

Japan Credit Rating Agency (JCRA) has upgraded the Philippines' credit rating to BBB, a notch above investment grade on strong economic conditions and political stability.

This is the country's third credit rating upgrade with Fitch Rating giving the Philippines its first investment grade on March 27 followed by Standard & Poor's (S&P) last week.

JCRA said the upgrade reflects the country's improved political stability in recent years, as well as the government's improving fiscal position backed by its prudent fiscal management and robust economic growth led by solid domestic demand underpinned by overseas Filipino remittances (OFWs).

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said JCRA was actually the first international rating firm that gave the country an investment grade -BBB ratings on the Philippines' foreign currency and local currency long-term senior debts being the "second step in the investment grade category."

JCRA, likewise, revised the outlook of the ratings to stable from positive.

"It is another affirmation and recognition of the progress that we have achieved," Tetangco said.
JCRA's higher investment rating is positive development, considering that Japan is the country's biggest bilateral creditor.

While the BSP chief admitted that the "challenge is how to sustain" the economic improvement, he assured, though, that "we have the means and the tools" to maximize the economic growth potential.

The rating firm, also, cited that country's enhanced resilience to external shocks rendered by the recent accumulation of foreign exchange reserves, which stood at $83.4 billion as of end April this year.

"JCRA is of the view that the Philippine economy will, by and large, sustain an annual economic growth at around 6 percent in the years to come supported by strong domestic demand," the agency said.

JCRA also said that the country's current account will remain in surplus backed by OFW remittances and business process outsourcing (BPO) revenues.

"Its fiscal position will continue to improve moderately as the Aquino government is committed to hold the fiscal deficit/gross domestic product (GDP) ratio within its 2 percent target from 2013 onwards," JCRA said.

The Philippine economy accelerated to a 6.6 percent growth in 2012 from 3.9 percent in the previous year on solid domestic demand supported by massive OFW remittances as well as increasing tourism and BPO receipts.

"The pattern in which OFW remittances support the balance of payments as well as private consumption is likely to continue in 2013," the agency said.

JCRA expects the country's GDP to grow around 6 percent this year.

The credit rater also cited that the higher taxes on tobacco and alcohol as well as the enhanced tax collection efficiency by the government revenue generating agencies.

However, JCRA also said that the country needs to upgrade infrastructure and improve the investment and business environment to ensure rapid and sustainable economic growth, "for which [they] expect to see commitment and initiative of the government."

"As the uncertainty persists over the prospect of the world economy, especially the European economy, JCRA will closely monitor its future developments and their possible impact on the Philippine economy," the rating agency said.

By Chino S. Leyco