Finance Secretary Benjamin Diokno said over the weekend the Philippines returned to the path of an “A” investment-grade rating after showing resilience during the COVID-19 pandemic.
Diokno expressed confidence the sovereign credit rating would reach the ‘A’ level by the end of the term of President Ferdinand Marcos Jr. despite the challenging global environment.
“We are firmly back on the road to ‘A’ and we hope to achieve this objective by the end of this administration in 2028,” Diokno said.
He said in a statement an upgrade to “A” rating would result in improved perception of the local and international business and financial communities to the country and help reduce the government’s borrowing cost.
“In turn, this will increase investments due to higher investor’s confidence and will eventually help in achieving the country in its long-term economic plans,” Diokno said.
The “Road to A” is the Philippine government’s program to achieve an investor-grade sovereign credit rating of ‘A’ from international rating agencies. These include the “Big 3” agencies—Moody’s Investor Service, Fitch Ratings and S&P Global Ratings—as well as Japanese raters R&I and the Japan Credit Rating Agency.
An A rating would affirm the Philippines’ creditworthiness and would serve as a strong signal to local and international business and financial communities that the country is conducive to long-term investments.
The Philippines has a “BBB+” sovereign credit rating from S&P Global. This is one notch below the minimum ‘A’ rating target of the government.
Fitch in May 2023 affirmed its “BBB” rating and simultaneously revised its outlook from negative to stable in view of their improved confidence in the Philippines’ strong medium-term growth after the pandemic and sustained reductions in government debt-to-GDP.
Fitch also assessed that the country’s economic policy framework remains sound.
“It is important to note that we managed to maintain investor-grade ratings even during the pandemic, while other countries were downgraded. Furthermore, the Philippines’ credit ratings remain strong compared to select rating peers,” Diokno said.
Diokno admitted that given the current global environment, getting an A rating would be challenging. Fitch Ratings downgraded the US debt rating from “AAA” to “AA+” last week, saying the downgrade was a result of the expected fiscal deterioration over the next three years and due to the high and growing general government debt burden.
The Bangko Sentral ng Pilipinas and the Department of Finance organized in 2019 an Inter-agency Committee on the Road to A Credit Rating Agenda, or the IAC on the Road to A. It aims to effectively coordinate the efforts of member agencies to develop, execute and monitor the implementation of the Road to A Roadmap.
The IAC aims to enhance engagements with analysts and investors; coordinate engagements with credit rating agencies and third-party raters; and increase the Philippines’ visibility through traditional and technology-based platforms.
The IAC has a three-pronged strategy that focuses on achieving solid economic growth; prudent fiscal management and strong governance standards and institutions.