Japan agency affirms Philippines' 'A-' rating

MANILA, Philippines – The Japan Credit Rating Agency (JCRA) has affirmed the Philippines’ credit ratings despite the economic fallout from the pandemic.

In a statement on Monday, the Japan-based debt watcher — whose ratings matter to Japanese companies, the country's top investors — maintained the “A-“ rating for the Philippines with a “stable” outlook, which indicates no near-term adjustments are expected in the country's level of creditworthiness.

“The ratings mainly reflect the country’s high and sustainable economic growth performance underpinned by solid domestic demand, its resilience to external shocks supported by an external debt kept low relative to GDP and the accumulation of foreign exchange reserves, the government’s solid fiscal position, and a sound banking sector,” JCR said.

The last time JCRA tweaked the Philippines’ credit rating was back in June last year, when the agency gave the Philippines its first ever “A” rating.

Explaining its latest decision, JCRA believes that the country’s fiscal soundness will not be diminished despite ballooning pandemic expenses while revenue collections remains weak, pointing to the Duterte administrations’ “appropriate” fiscal policies and a “subdued” government debt.

If anything, it was a nod to the Duterte administration’s strategy of reining in spending to avoid incurring wide budget deficits even as the country’s pandemic needs continue to grow. Interestingly, this kind of game plan was roundly criticized by several watchers, who pointed out that the state’s reluctance to ramp up pandemic spending would result into deep economic scars.

In July, Fitch Ratings, one of the so-called “Big Three” credit rating agencies, revised its outlook on the Philippines from “stable” to “negative”, meaning the country is at risk of seeing its first credit rating downgrade in 16 years if the pandemic continues to weigh on the state’s balance sheet and the economy.

Credit ratings spell ease or difficulty for countries looking to tap the debt market because a higher rating could reduce borrowing costs for the government.

“At the moment, recovery of economic activities is being delayed due to re-strengthened mobility restrictions forced by the resurgence of the COVID-19 including the Delta variant,” JCRA said.

“However, the government has been swiftly implementing adequate measures such as increased public health-related expenditures, acceleration of vaccination and continuation of employment program by drawing upon its relatively strong fiscal position before the pandemic,” it added.