MANILA – Finance secretary Carlos Dominguez III on Tuesday attributed to President Rodrigo R. Duterte’s leadership the upgrade by Standard and Poor (S&P) of Philippines’ investment grade credit rating to “BBB+,” a notch away from A-level, with stable outlook.
S&P also noted that the domestic economy is among the fastest growing in the world on a 10-year weighted average and on per capita basis.
This, it said, is “a reflection of its supportive policy dynamics and improving investment climate.”
“Credit belongs to PRRD’s strong leadership and his 10-Point Economic Program,” he told journalists covering the finance beat.
The 10-point agenda bids for the continued implementation of macroeconomic policies, institution of progressive tax reform program and more effective tax collection, increase of the country’s competitiveness and ease of doing business, increase in public spending on infrastructure, and promotion of rural and value chain development.
It also targets to ensure security of land tenure to entice more investments, invest in human capital development; promote science, technology, and creative arts to promote innovation; improve social protection programs and firm up implementation of responsible parenthood and reproductive health law.
In a statement, Dominguez said the upgrade also “means that the bonds we issue will attract more investors at interest rates lower than what we are currently paying, saving millions of pesos for the Filipino taxpayers.”
“We are now one notch away from an A- rating. This is due to President Duterte’s strong leadership and his 10-Point Economic Program,” he added.
The ratings upgrade was announced about a year after S&P changed its ratings outlook on the country’s then ‘BBB’ rating from Stable to Positive.
S&P, along with Fitch Ratings and Moody’s Investors Services, elevated the country’s credit ratings to investment grade since 2013 due to the continued expansion of the economy.
It explained that the ratings can be increased over the next two years “if the government makes significant further achievements in its fiscal reform program, or if the country’s external position improves such that its status as a net external creditor becomes more secure over the long term.”
Another factor is when the debt watcher finds “that the institutional settings in the Philippines have improved markedly.”
It, however, pointed out that the ratings may be reduced “if the government’s fiscal program leads to much higher-than-expected net general government debt levels, or if real GDP (gross domestic product) growth declines significantly.”
The trajectory of domestic growth is expected to “continue to drive constructive development outcomes and underpin broader credit metrics over the medium term.”
S&P expects the current domestic expansion rate to be sustained “as long as investment is maintained.”
“The economy’s constructive trajectory should be underpinned by strong household and company balance sheets, continued income growth, sizeable inward remittance flows, and an adequately performing financial system,” it said.
The debt rater also noted the government’s measures to put in place effective fiscal policies, which results in improved quality of expenditures, manageable fiscal deficits, and low levels of general government indebtedness. (PNA)
