Philippines scores ‘A-’ from Japan Credit Rating Agency

The Japan Credit Rating Agency Ltd. (JCR) has upgraded the Philippines' foreign currency long-term issuer rating to 'A-', as it said it expects the current economic downturn to be "limited."

In a statement released on June 11, the JCR noted that the Philippines' fiscal soundness is expected to be impaired, as its fiscal deficit is "justifiable" and government debt is "comparatively subdued."

This pushed JCR to upgrade the Philippines' issuer rating to 'A-' which indicates that the country has a "high level of certainty to honor the financial obligations."

The latest rating is a notch higher than the 'BBB+' in July 2015, which indicated that the country had an "adequate" level to honor financial obligations, but the certainty was "likely to diminish in the future than with the higher rating categories."

A higher credit rating is generally seen as favorable, as this would give the country lower borrowing costs.

The latest update, however, downgraded the Philippine outlook to "stable" -- which means that a rating is not likely to change in the foreseeable future -- from "positive."

"At the moment, the Philippines’ economic growth is under downward pressure on the back of the impact of temporary reduction of economic activity due to the implementation of quarantine measures to contain the spread of COVID-19," JCR said.

"However, 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 GDP," it said.

Earlier this week, the World Bank said it expects the Philippine economy to contract by 1.9% this year, following the 6.0% growth last year.

Still, the latest development was welcomed by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno who said the upgrade was "encouraging news at this challenging time."

"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," he said in a separate statement.

"On the part of the BSP, we have already implemented a long list of extraordinary relief measures, and we stand ready to do more if needed," he added.

Diokno in May said the quest for an 'A' credit rating will temporarily have to take a backseat while the government focuses on providing assistance to those hit by the coronavirus disease.

"While we have temporarily veered our attention away from the ‘Road to A’ agenda because our focus at the moment is on saving lives, jobs, and livelihoods, we welcome positive assessments from international observers like JCR. We hope this helps to uplift the Filipino spirit at this trying time and to inspire us to work harder together to emerge stronger after the pandemic," Diokno said. —LDF, GMA News