Japan rating firm lifts outlook on Philippines, signals possible upgrade
MANILA - Japan's Rating & Investment Information Inc (R&I) today raised its outlook on the Philippines to positive, saying an upgrade is possible if the country sustains economic growth and raises Filipinos' incomes.
In a report issued on Friday, R&I revised its outlook from stable to positive, citing the Philippines' robust economic growth, its dollar surplus and the government's improving finances. R&I rates the country as investment grade with a score of "BBB-".
In revising its outlook, R&I cited the Philippines' "strong growth thanks to continued robust consumption driven by remittances from (OFWs), coupled with expansions in public investment and exports."
The Japanese debt watcher also cited stable inflation, rising foreign reserves brought about by the "sustained" current account surplus and the "steady progress of fiscal consolidation."
With its finances in order, the government "is now able to allocate more fiscal budgets, albeit gradually, to infrastructure projects and educational policies," R&I said.
It also pointed to gains on the political front, principally the peace efforts in western Mindanao, which in turn would improve the investment climate.
"If fundamentals for economic growth are solidified and steady increases in per-capita income become more promising, R&I will consider a rating upgrade," the rating firm said.
"Opportunity for catching up"
It noted that the Philippines is the only one among the Asean-5 that has yet to attain a per capita gross domestic product (GDP) of $3,000, but added that "at long last, the country sees a clearer opportunity for catching up." Apart from the Philippines, the other founding members of Asean are Indonesia, Malaysia, Singapore and Thailand.
The Philippines' GDP grew a record 7.8 percent in the first quarter of this year, well above the full-year official target of 6-7 percent. The country's economic managers have since expressed confidence that full-year GDP expansion would hit a fresh record.
But poverty has been stubborn, refusing to budge from levels seen six years ago. Likewise, the record economic expansion has failed to dampen unemployment, raising concerns about "jobless growth."
R&I however acknowledged that addressing the above problems "is not an overnight task."
"A focus will be placed on whether the Aquino administration will be able to make the best use of positive factors, such as the strong economic growth and political stability, in efforts to break a stalemate in investment, a structural problem that has haunted the Philippine economy," the rating firm said.
"Great strides for lasting peace"
Finance Secretary Cesar V. Purisima welcomed R&I's outlook upgrade, saying, "The gains of good governance are again recognized by those who monitor world economies, with our tax collection reforms and our landmark sin tax reform law contributing greatly to the positive outlook."
“I commend R&I for noting not just the prudent fiscal management we have implemented under President Aquino, but the great strides we have taken towards lasting peace in Mindanao. With the recent signing of the wealth sharing annex to the Framework Agreement on the Bangsamoro, we have come closer to enshrining perpetual inclusive growth in law for all Filipinos," Purisima said in a statement.
Another Japanese rating firm, Japanese Credit Rating Agency (JCR), last May upgraded the Philippines, after Fitch Ratings and Standard & Poor's promoted the country to investment grade.
R&I's revision in its outlook comes a week after Moody's Investors Service served notice that it placed the Philippines on review for a possible upgrade to investment status.
MANILA - Japan's Rating & Investment Information Inc (R&I) today raised its outlook on the Philippines to positive, saying an upgrade is possible if the country sustains economic growth and raises Filipinos' incomes.
In a report issued on Friday, R&I revised its outlook from stable to positive, citing the Philippines' robust economic growth, its dollar surplus and the government's improving finances. R&I rates the country as investment grade with a score of "BBB-".
In revising its outlook, R&I cited the Philippines' "strong growth thanks to continued robust consumption driven by remittances from (OFWs), coupled with expansions in public investment and exports."
The Japanese debt watcher also cited stable inflation, rising foreign reserves brought about by the "sustained" current account surplus and the "steady progress of fiscal consolidation."
With its finances in order, the government "is now able to allocate more fiscal budgets, albeit gradually, to infrastructure projects and educational policies," R&I said.
It also pointed to gains on the political front, principally the peace efforts in western Mindanao, which in turn would improve the investment climate.
"If fundamentals for economic growth are solidified and steady increases in per-capita income become more promising, R&I will consider a rating upgrade," the rating firm said.
"Opportunity for catching up"
It noted that the Philippines is the only one among the Asean-5 that has yet to attain a per capita gross domestic product (GDP) of $3,000, but added that "at long last, the country sees a clearer opportunity for catching up." Apart from the Philippines, the other founding members of Asean are Indonesia, Malaysia, Singapore and Thailand.
The Philippines' GDP grew a record 7.8 percent in the first quarter of this year, well above the full-year official target of 6-7 percent. The country's economic managers have since expressed confidence that full-year GDP expansion would hit a fresh record.
But poverty has been stubborn, refusing to budge from levels seen six years ago. Likewise, the record economic expansion has failed to dampen unemployment, raising concerns about "jobless growth."
R&I however acknowledged that addressing the above problems "is not an overnight task."
"A focus will be placed on whether the Aquino administration will be able to make the best use of positive factors, such as the strong economic growth and political stability, in efforts to break a stalemate in investment, a structural problem that has haunted the Philippine economy," the rating firm said.
"Great strides for lasting peace"
Finance Secretary Cesar V. Purisima welcomed R&I's outlook upgrade, saying, "The gains of good governance are again recognized by those who monitor world economies, with our tax collection reforms and our landmark sin tax reform law contributing greatly to the positive outlook."
“I commend R&I for noting not just the prudent fiscal management we have implemented under President Aquino, but the great strides we have taken towards lasting peace in Mindanao. With the recent signing of the wealth sharing annex to the Framework Agreement on the Bangsamoro, we have come closer to enshrining perpetual inclusive growth in law for all Filipinos," Purisima said in a statement.
Another Japanese rating firm, Japanese Credit Rating Agency (JCR), last May upgraded the Philippines, after Fitch Ratings and Standard & Poor's promoted the country to investment grade.
R&I's revision in its outlook comes a week after Moody's Investors Service served notice that it placed the Philippines on review for a possible upgrade to investment status.
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