Japanese rating agency R&I affirms foreign currency issuer rating at BBB, outlook stable

December 19, 2017

Japanese rating agency R &I on Tuesday affirmed the Philippines' foreign currency issuer rating at BBB and placed the outlook as stable.

The agency also affirmed foreign currency short-term debt at a-2.

R&I said the rating outlook is stable, "because at present there are few factors that will exert downward pressure on the sovereign's creditworthiness."

"R&I will keep an eye on whether solid economic growth will bring about a steady rise in income levels, " it added.

Eyes are on the BSP's handling in inflation control while preserving economic growth momentum, said R&I.

It said  " given likely inflation pressure from tax reforms, higher oil prices and the weaker currency, as well as from buoyant domestic demand, consumer price trends and the way the central bank controls the situation would draw our attention."

R& I said "in response to recent strong demand, inflation is edging up following temporary excessive disinflation due mainly to easing global oil prices. Going forward, upward pressure will arise primarily from oil price trends and tax reforms."

If managed within the target range of 2-4%, however, inflation will not be a drag on the economy, in R&I's view.

R&I said the Philippines' economy is expected to post solid growth, driven by aggressive infrastructure investment under the Rodrigo Duterte administration.

"Anticipated widening of the fiscal deficit and another current account deficit will unlikely be a major disturbing factor. The financial system remains stable," the ratings agency said,

In addition to robust private consumption backed by stable remittance inflows from overseas Filipinos, growth in investment has been increasing in recent years, R&I said.

"With the rising share of investment in gross domestic product (GDP), the aggressive public investment program initiated by the Duterte administration would serve as a platform for economic growth in the foreseeable future," it added.

For 2017, the Philippine government targets to grow the economy by 6.5-7.5 percent and aims to accelerate growth further to 7.0-8.0 percent in 2018-2022. To that end, it is essential to sustain the momentum of investment from inside and outside the country by improving the business environment through continued reforms, said R&I. DMS