Another credit-rating upgrade:
R&I says infrastructure investments, reforms to boost incomes in PH
The Philippines has secured another credit-rating upgrade, this time from Japan-based R&I, which sees consistent rise in per-capita income in the country as a result of immense growth in infrastructure investments and continuity of reforms.
R&I raised the country’s long-term foreign-currency issuer rating by a notch from the minimum investment grade of BBB- to BBB. The rating was assigned a “stable” outlook, which means it is unlikely to change within a year.
At the same time, the credit watchdog maintained the country’s short-term debt rating at a-2, which indicates high certainty that short-term financial obligations would be paid.
“The Philippines’ economy continues to show strong growth, thanks to brisk investment coupled with private consumption driven by remittances from overseas Filipinos,” R&I said in a report released Wednesday.
“This should allow for relatively high growth and raise per-capita income levels steadily,” it stressed.
Per-capita income in the Philippines has been modest compared with those of more advanced neighbors, but the country is catching up in this area. From $3,684 in 2009, per capita income in the country (using current prices and purchasing power parity) increased to $4,649 last year.
R&I recognized the country’s healthy fiscal situation, saying this helps fulfill the plan of boosting public spending.
“Savings in interest payments, thanks to fiscal consolidation, help the government to finance infrastructure projects. Budget execution is also expected to accelerate,” it said.
This year’s state budget for infrastructure at P404.3 billion, R&I cited, is 40 percent more than last year’s.
R&I also said the rollout of more projects under the Public-Private Partnership (PPP) program would help drive more job-generating investments and sustain the rise in incomes.
“Furthermore, public-private partnerships, which utilize private capital [for funding public infrastructure], are underway, albeit gradually, and will likely boost investments,” R&I said.
Earlier this year, the government awarded contracts for two PPP projects, namely the P1.72-billion automated fare collection and single ticketing system for the MRT and the LRT, and the P17.5-billion Mactan Cebu International Airport expansion project. This brings to seven the total number, and to P62.6 billion the aggregate cost, of the PPP projects awarded so far.
R&I also recognized the country’s sound macroeconomic fundamentals, including ample foreign-exchange reserves, improving manageability of government debt, and within-target inflation.
It also said reforms instituted by the Aquino administration, including legislative and administrative reforms in tax collection, helped improve the investment climate. R&I expressed belief reforms will be sustained even beyond 2016.
“There is risk that the next government will not be as reform-minded as the Aquino administration. However, pressures from growing international relationships, such as the establishment of the ASEAN Economic Community in 2015, along with public expectation for sustained reform initiatives, should deter the post-Aquino government from going backwards,” it said.
Meantime, Governor Amando M. Tetangco Jr. of the Bangko Sentral ng Pilipinas welcomed the upgrade, saying this validates soundness of existing policies.
“The latest development on the country’s credit standing is a recognition of a host of favorable macroeconomic indicators, particularly an inflation outlook that is conducive for business and the stability of the financial system amidst a difficult operating environment,” Tetangco said.
“The upgrade is an expression of confidence, in part, on the ability of the Monetary Authority to implement appropriate and timely measures that ward off threats to the economic stability we are enjoying. The BSP will continue to craft policies that will help maintain this stability,” The BSP chief added.
Finance Secretary Cesar Purisima likewise affirmed the focus on sustainability of favorable trends for the economy.
“Reforms that this government has started to institutionalize help ensure that the positive momentum will not falter,” Purisima said.
“On the fiscal front, administrative and policy reforms implemented by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) will make it easier in the future to keep the growth trend in public revenues,” he said.
Investor Relations Office (IRO) Executive Director Editha Martin said the country’s upward movement in the credit-ratings scale bodes well for raising the country’s international profile as an investment destination.
“It is always good to have institutions outside the government point out the strengths of the Philippine economy. The string of credit-rating upgrades that the country has secured in recent years makes it difficult for investors not to notice the Philippines,” Martin said.