Japanese debt watcher raises PHL outlook to ‘positive’

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THE Philippines is closer to securing a single-A credit rating from Japanese Credit Rating (JCR) Agency, after the debt watcher raised its outlook on the country to BBB+ positive from BBB+ stable.

In a statement, the government’s Investor Relations Office (IRO) said JCR upgraded the outlook on the Philippines because of the “government’s twin efforts to accelerate infrastructure development and boost revenues through tax reform.”

“JCR’s BBB+ rating with positive outlook is just one notch away from a single-A credit rating… A single A credit rating will place the Philippines on the radar screen of even more portfolio investors, given that some institutional investors have a policy of investing only in bonds issued by A-rated sovereigns or corporate entities,” the IRO said.

The JCR report was quoted as saying “infrastructure development has accelerated under the Duterte administration amid expanding expenditures based on its Public Investment Program and improved budget execution rate brought by budget reforms.”

Under the “Build Build Build” program, the administration has committed to to spend up to P8 trillion on priority infrastructure projects up to 2022, when President Rodrigo R. Duterte ends his six-year term.

The Japanese debt watcher also cited the government’s tax reform efforts. “As part of its efforts to secure the necessary financial resources for such expanding expenditures, the government has been vigorously pursuing its comprehensive tax reform program (CTRP),” it said.

Mr. Duterte has so far signed two tax reforms into law, the Tax Reform for Acceleration and Inclusion (TRAIN) Act and Tax Amnesty Act. Other key tax measures, including the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill, are still pending in Congress.

Finance Secretary Carlos Dominguez III said the JCR’s positive outlook is a “recognition of the Duterte administration’s aggressive yet prudent economic policy of spending big on infrastructure modernization while maintaining fiscal discipline.”

“The Philippines’ robust economy is sustainable over the long haul, in part, because of the BSP’s commitment to maintain price stability and the soundness of the banking and financial system,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said.

“The BSP will continue to provide an enabling environment for sustainable, robust, and more inclusive economic growth by staying committed to its price and financial stability mandates,” Mr. Diokno added.

JCR also noted that the robust banking system is providing support to sustainability of the country’s economic growth. It cited the banking system’s low exposure to bad debts, with the non-performing loan (NPL) ratio at 1.8%, and sufficient capitalization, with the capital adequacy ratio at 15%, in 2018.

The Philippines currently has investment-grade credit ratings from Moody’s Investors Service, Fitch Ratings and S&P Global Ratings. — RJNI