Japan Credit Rating Agency Maintains Philippines’ ‘A-‘ Credit Rating

MANILA — The Japan Credit Rating Agency, Ltd. (JCR) announced on Wednesday that it has affirmed the Philippines’ credit rating at ‘A-‘ with a stable outlook.

According to Philippines News Agency, the decision reflects the nation’s robust and sustained economic growth, primarily fueled by strong domestic demand, low external debt, resilience to external shocks due to significant foreign exchange reserves, and a solid fiscal foundation.

The Philippines recorded a 5.6 percent economic growth last year, outperforming other major Asian economies that have published their full-year 2023 gross domestic product (GDP) figures. The countries compared include China with a 5.2 percent GDP growth, Indonesia and Vietnam both at 5.1 percent, Malaysia at 3.7 percent, and Thailand at 1.9 percent. JCR projects the Philippine economy to expand by 6 percent in the current year, driven by the recovery of external and tourism demand, robust private consumption supported by moderate price increases, and the stable inflow of remittances from overseas Filipinos.

Additionally, JCR highlighted that the government’s debt-to-GDP ratio at the end of 2023 stood at about 60 percent, marking one of the lowest ratios among A-range rated sovereigns. The agency also recognized the strength of the Philippines’ foreign currency liquidity position.

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. expressed his appreciation for JCR’s recognition, emphasizing that the country’s external payments position is expected to remain manageable. This stability is backed by continuous foreign exchange inflows from various sources, including overseas Filipino remittances, business process outsourcing revenues, foreign direct investments, and tourism receipts. Furthermore, the Philippines maintained substantial foreign exchange reserves, with preliminary data indicating gross international reserves amounted to USD103.3 billion as of the end of January 2024. This reserve level provides a liquidity buffer equivalent to 7.7 months of imports of goods and services and primary income payments.

The agency also noted confidence in the Philippine government’s ability to preserve fiscal soundness, attributing this to the effective fiscal consolidation efforts promoted by President Ferdinand R. Marcos Jr.’s administration, as outlined in the Medium-Term Fiscal Framework. Holding an investment-grade rating underscores a lower credit risk, which facilitates access to funding from development partners and international debt capital markets at reduced costs. This, in turn, enables the government to reallocate funds from interest payments to socially impactful programs and projects.