MANILA — Budget and Management Secretary Florencio “Butch” Abad on Wednesday lauded the latest credit rating upgrade by R&I to the Philippines, saying the country is on its way to becoming one of Asia’s major commercial hubs.
“News of this credit rating upgrade is certainly cause for celebration. While the country has already secured the long-sought approval of other credit rating agencies, the addition of R&I to this list of rating firms only confirms what we have always known — that the Philippines is poised to become one of Asia’s major commercial hubs. The country has never been more ready to expand its market to accommodate local and foreign investments,” said Abad in a statement.
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,” said R&I in a report released Wednesday.
“This should allow for relatively high growth and raise per-capita income levels steadily,” it said.
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 US$ 3,684 in 2009, per capita income in the country (using current prices and purchasing power parity) increased to US$ 4,649 last year.
R&I also 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.
Abad noted that this is the 19th time that the Philippines has received a credit rating upgrade. More significantly, he said, all 19 of these upgrades “were granted since President (Benigno) Aquino (III) assumed office.”
“Just as notable is the fact that it’s been 13 years since R&I hiked up our rating. Their last rating action was made in 2001, when we reached BBB- status. We are now enjoying a rating of BBB, which means that there’s growing investor confidence in the country’s creditworthiness and industry potential,” he said.
The DBM chief said a key component of achieving investment grade “is ensuring the stability and the reach of our economic expansion.”
“Crucial to our economic development, of course, is the facilitation of robust and efficient spending. While we are now addressing challenges in the public expenditure process, we have no doubt that government spending will continue to spur the country’s growth, especially as the budget provides greater support for the administration’s socio-economic programs,” he stressed.
“The term ‘credit rating’ isn’t just a fiscal abstraction, though. When investors bring their business into the country because of our lower risk profile, we can look forward to implementing more public works and creating broader job opportunities for our growing workforce.
This year’s State budget for infrastructure at Php404.3 billion, R&I cited, is 40 percent more than last year.
R&I also said the roll-out of more projects under the Public-Private Partnership (PPP) program would help drive more job-generating investments and sustain the rise in incomes.
“With President Aquino at the helm of our budget reforms and governance initiatives, we’re confident that the country’s credit rating will show further improvement for the remainder of the administration,” said Abad.
“Our ultimate goal is to bring swift, long-term, and inclusive socio-economic development to the country. Only then will all Filipinos truly benefit from our good governance campaign,” he said.