PH KEEPS ‘INVESTMENT GRADE’ CREDIT RATINGS AMID GLOBAL COVID-19 CRISIS

Amid the global COVID-19 crisis that has weakened fundamentals of many economies and caused their credit ratings to deteriorate, the Philippines was able to maintain its investment grade credit ratings throughout the pandemic.

International and regional credit rating agencies (CRAs) are on a consensus that the Philippines remains credit and investment worthy, given the economy’s capacity to bounce back from the crisis.

This resilience was proven by the 5.7-percent growth of the economy in 2021 and the higher-than-projected growth of 8.3 percent in the first quarter of 2022.

Thanks in part to the communication campaign of the BSP’s Investor Relations Office, data-backed messages on the strength of the country’s macroeconomic fundamentals and favorable economic outlook have been highlighted and shared with CRAs and other relevant stakeholders from the international community.

The Philippines entered the crisis in a position of strength. For instance, the country’s healthy fiscal situation allowed it to borrow funds to finance crisis-response initiatives without causing unmanageable debt down the road.

Against this backdrop, international CRAs Fitch Ratings, Moody’s Investors Service, and S&P Global affirmed the country’s investment grade credit ratings. Worth noting is that the Philippines’ credit rating of BBB+ with S&P – which is two notches above the minimum investment grade – is the highest credit rating from an international debt watcher that the country has ever received.

In addition, two regional CRAs – Japan-based agencies Rating and Investment Information Inc. (R&I) and Japan Credit Rating Agency (JCR)--even upgraded the country’s credit ratings in 2020, while China-based Lianhe has kept the country’s rating at AAA, the highest in the credit rating scale.

Credit ratings are scores assigned to bond issuers (such as countries or corporate entities) that indicate how risky it is to invest in the bonds. Broadly, “investment grade” credit ratings are scores that indicate lower risk of default, while “speculative” credit ratings are scores that indicate higher risk of default. Countries with “investment grade credit ratings” are able to borrow funds to support various expenditure requirements at relatively lower cost than countries with “speculative” credit ratings.

Since credit ratings reflect how a government manages a country’s economy, they also help attract (or discourage) foreign direct investments.

The Philippines’ ability to keep its investment grade credit ratings intact helped the country access financing from domestic and international sources at favorable costs.

This was helpful in the government’s efforts to fund COVID-19 response measures and to support economic growth at a critical time while keeping its debts within manageable levels.