Japan-based Rating and Investment Information, Inc. (R&I) has kept its BBB+ credit rating with a stable outlook for the Philippines, citing the country’s robust post-pandemic growth prospects.

In a statement on Friday, the debt watcher cited Philippine potential to bounce back from last year’s 9.6% drop in economic output as investments come in, and fiscal and monetary policies remain accommodative.

“The Philippines’ economy suffered a severe contraction due to the COVID-19 pandemic in 2020 but is expected to recover primarily through aggressive public investment, which had driven the economy in the past several years,” it said. “Fiscal and monetary policies will boost growth for some time.”

The rating was a “vote of confidence” in the country’s ability to bounce back from the COVID-19 crisis, central bank Governor Benjamin E. Diokno said in a separate statement.

“With the recent surge in COVID-19 cases, the tail end of the crisis is proving to be extra challenging,” he said. “Nevertheless, we do not see a permanent dent on our macroeconomic fundamentals, and we can head back to our growth path post-COVID.”

The rating company first upgraded its rating for the country in February 2020 from BBB. A BBB+ rating is a notch away from the minimum score A rating that the government is aiming for. A stable outlook means the rating is unlikely to be changed in the near term.

R&I said the government’s fiscal position was manageable amid higher spending and increased budget deficit at the height of a coronavirus pandemic.

The fiscal gap ballooned to 7.6% of gross domestic product (GDP) last year from 3.2% a year earlier, while its debt stock level was expected to rise to 57% this year from 54.5% last year and 39% in 2019.

“R&I does not view this as a major issue at this juncture, because of a comfortable funding condition backed by ample domestic liquidity and the prospect of peaking out of the debt ratio within one to two years,” it said.

“The overall balance of payments is positive and foreign reserves are greater than external debt. R&I therefore considers the risk associated with the external position to be limited,” it added.

The Japanese rating agency also said crucial measures that seek to fast-track recovery that were enacted recently would help, including one that lowered the corporate income tax and another that would help banks offload their soured loans.

“Eyes are on whether the country will be able to enhance resource allocation efficiency and productivity in the medium to long term by capitalizing on these reforms,” it said.

It said other bills pending in Congress aiming to liberalize certain industries should be passed.

Mr. Diokno said the favorable long-term outlook on inflation, the country’s stable banking system and faster digital adoption should bolster confidence in the country’s medium- and long-term growth prospects.

R&I had taken notice that “although the global fight against the pandemic has proven to be a costly one, the country’s strong macroeconomic fundamentals ahead of the pandemic have enabled the government to accelerate spending on urgent and necessary programs to save lives and keep the economy afloat,” Finance Secretary Carlos G. Dominguez III said in the statement.

“With a manageable debt profile, a steady revenue stream brought about by tax reform, and the continued practice of fiscal prudence, the government is confident it will not run out of resources in waging the protracted battle against the COVID-19 crisis,” he added.

Other credit raters have affirmed their latest ratings for the Philippines as well amid the pandemic.

But Moody’s Investors Service last month said a coronavirus resurgence and renewed lockdowns in the capital region and nearby provinces were “credit negative” given their effects on economic recovery.

Moody’s affirmed its Baa2 credit rating with a stable outlook for the Philippines in July.

In January, Fitch Ratings also kept its BBB rating with a stable outlook for the country, while S&P Global Ratings maintained a BBB+ sovereign rating, with a stable outlook as well.

The Bangko Sentral ng Pilipinas (BSP) fully awarded the short-term securities it offered on Friday as rates declined after the government’s recent euro bond sale.

The central bank raised P90 billion from 28-day bills it auctioned off, with total tenders reaching P145.25 billion or 1.6 times as much as the initial offer. Total bids were also higher than P132 billion in the previous auction last week.

The one-month debt paper fetched an average rate of 1.8286%, down by 2.76 basis points from a week earlier. Yields sought by investors ranged from 1.7925% to 1.8440%, lower than last week.

This marked the fifth straight month of decline for the rates of these short-term securities.

The Philippine central bank uses its short-term securities and term deposit facility to mop up excess liquidity from the system and guide short-term rates.

The lower yield was largely due to the recently concluded euro-denominated bond sale of the National Government after the jumbo issuance cut the need to borrow from the local debt market, Michael L. Ricafort , chief economist at Rizal Commercial Banking Corp. said said in a Viber message.

The low demand helped push domestic yields down, he added.

The government on Thursday raised €2.1 billion (P122.4 billion) from a triple-tranche offering of euro-denominated bonds. It sold €650 million worth of four-year global bonds, another €650 million worth of 12-year notes, and €800 million worth of 20-year debt.

Total tenders for the exercise reached €6.5 billion, or three times as much as the initial offer.

“The 28-day BSP securities yield also continued to ease amid the recent easing in the benchmark 10-year US Treasury yield to new one-month lows,” Mr. Ricafort said.

The peso’s continued appreciation against the dollar and easing inflationary pressures had also caused the yields of the central bank bills to fall, he added.

Inflation slowed to 4.5% in March from 4.7% in February as food price increases eased. But the central bank expects full-year inflation to hit 4.2%, beyond its 2-4% target.