Malaysia debt watcher hikes Philippine credit rating to positive
MANILA, Philippines — Kuala Lumpur-based RAM Rating Services Bhd upgraded the credit rating outlook of the Philippines to positive from stable amid the Duterte administration’s bold infrastructure agenda and efforts for tax reform, alongside robust economic growth and strong external payments position.
The Malaysian debt watcher said the country’s outlook was upgraded to reflect the stronger-than-expected gross domestic product (GDP) performance in 2016 and growing foreign direct investments despite a change in administration in June last year.
A “positive” outlook means that the Philippines’ existing global scale rating of BBB3 and regional scale rating of A1 from RAM Ratings have chances of getting upgraded over the short term.
BBB3 is the minimum investment grade, while A1 is four notches away from the highest rating of Triple A.
Global rating reflects a country’s perceived creditworthiness compared with countries from around the globe, while regional rating shows comparison vis-a-vis Southeast Asian neighbors.
The opinion of RAM Ratings serves as guide for investment decisions of corporate entities mostly from Asia.
Finance Secretary Carlos Dominguez said the positive outlook from RAM Ratings is another confidence vote in the Duterte administration’s resolve to grow the Philippine economy and achieve financial inclusion through the Build Build Build program while maintaining fiscal discipline and ensuring the infra buildup’s sustainability via a comprehensive tax reform program.
“Through sustained massive public investments in infrastructure and social services over the medium term, the government aims to accelerate poverty reduction, attract more investments, create enough jobs and transform the country into an upper middle-income economy by the end of President Duterte’s term in 2022,” Dominguez said.
Under the Build Build Build program, dubbed as the country’s boldest infrastructure agenda thus far, the administration targets to spend between P8- and P9-trillion on roads, railways, airports, seaports and other big-ticket infrastructure projects to boost infrastructure spending to 7.3 percent of GDP by 2022 from 4.5 percent of GDP in 2016.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said the country’s strong external payments position, as recognized by RAM, would remain robust over the medium term.
“The country’s external payments position, which lends strong support to the country’s investment grade credit ratings, is expected to remain strong in the years ahead on account of significantly rising FDIs, underpinned by sustained inflows in remittances and growing tourism receipts,” Espenilla said.