JAPAN CREDIT Rating Agency said the impact of the coronavirus pandemic on the Philippine economy will likely be temporary. — REUTERS

JAPAN CREDIT Rating Agency (JCR) on Thursday upgraded the Philippines’ credit rating to “A-” from BBB+, saying it expects the economic impact of the coronavirus pandemic to be temporary.

At the same time, JCR assigned a “stable” outlook on the rating, suggesting this will likely be maintained in the near term.

“JCR holds that a downturn will be limited given the country’s strengthened economic base, resilient external position, and the government’s economic stimulus package totaling more than 9% of gross domestic product,” said the government’s Investor Relations Office (IRO) in a statement on Thursday, citing the JCR report.

“JCR also considers that the fiscal soundness will not be impaired because while the fiscal deficit may widen, the package at this time is justifiable and the government debt will remain comparatively subdued,” it added.

The debt watcher cited the stability of the country’s banking industry, which has a capital adequacy ratio “at a comfortable 15%.”

It said the country’s external debt balance was manageable at 22.2% of the gross domestic product (GDP) as of end-2019 and also cited its ample dollar reserves.

“JCR holds that the country will show its high resilience even when global risk-off moves would be triggered again by a second wave of COVID-19 pandemic,” JCR said, noting it expects the country to grow at a pace of 6-7% within the medium term after a likely contraction in 2020.

JCR cited the country’s “massive relief measures” and its tax reform program.

The country’s upgrade to an “A” status is among the three upgrades out of the 14 rating actions from JCR that were mostly either downgrades, negative outlook revision, or rating affirmations.

Other “A-” rated countries with JCR include Thailand, Mexico, Hungary and Peru. Indonesia and India have “BBB+” ratings while Malaysia, Italy, Poland and Portugal are rated “A”.

“The credit rating upgrade from JCR bodes well for the Philippine government’s fund-raising activities, which in recent years have included regular issuance of Samurai bonds,” the IRO said, noting that many Japanese institutional investors go for countries with an “A-” rating or higher from JCR.

“The agency’s decision reflects its confidence that the Philippines is pursuing appropriate policies that will help Filipino individuals, businesses, and the economy at large to recover from this unprecedented crisis,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said in the statement.

Fitch Ratings recently affirmed its “BBB” rating for the Philippines, but lowered the rating outlook to “stable” from “positive,” which means the rating is likely to stay for the next six months to two years.

S&P Global Ratings has likewise maintained its “BBB+” rating with a “stable” outlook for the country, citing expectations of a strong economic rebound after the coronavirus crisis. — Luz Wendy T. Noble

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