Diokno: S&P affirms credit rating, reflects investor confidence

The Department of Finance (DOF) said that S&P Global Ratings’ affirmation of the Philippines’ investment grade credit rating signifies a vote of confidence.

In a statement on Wednesday, Nov. 29, Finance Secretary Benjamin E. Diokno said that S&P Global’s favorable decision follows a series of downgrades affecting various countries, including the United States.

“That’s an accomplishment of the PBBM [President Bong Bong Marcos] administration,” Diokno said. “In a sea of downgrades, the international rating agencies continue to affirm their confidence in the Philippine economy’s macroeconomic fundamentals.”

The Marcos administration aims to achieve the highest investment grade, an “A” rating, before its term concludes in 2028.

Attaining an “A” rating from one of the three major credit rating agencies, such as S&P Global, would provide the country with access to loans at improved interest rates and enhance its appeal to foreign investors.

“We continue to pursue the Road to A under President Marcos, Jr.’s administration,” Diokno said.

S&P Global affirmed the Philippines’ ‘BBB+’ long-term and ‘A-2’ short-term sovereign credit ratings with stable outlook in view of the country’s sustained economic recovery and strong external position.

In its latest report, S&P Global noted the Philippines’ above-average economic growth potential compared to its peers, which will be supported by stable macroeconomic fundamentals driven by the government’s sound macroeconomic policy and fiscal consolidation strategy.

“The Marcos, Jr. administration is committed to pursuing the path of fiscal consolidation and introducing sound policies and structural reforms to strengthen the country’s fiscal and economic position to maintain if not improve this favorable assessment,” Diokno said.

S&P projects that the Philippines will achieve a moderate real gross domestic product (GDP) growth of 5.4 percent in 2023 considering the impact of external macroeconomic developments and a high base.

Such external factors include the projected slower world economic growth, particularly from the Philippines’ largest trading partners––China and the US.

S&P also forecasts the country’s growth to increase to 5.9 percent in 2024, 6.2 percent in 2025, and 6.4 percent in 2026.

The credit rater expects that the Philippines’ economic growth will remain well above the average among its peers due to the government’s ongoing efforts to address infrastructure gaps and improvements in the business climate through regulatory and tax reforms, which will further support expansion in economic productivity.

S&P also recognized the government’s efforts to prioritize infrastructure development and fiscal measures and cited crucial reforms such as the public-private partnership (PPP) framework and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

“The Philippine government has generally enacted effective and prudent fiscal policies over the past decade. Improvements to the quality of expenditure, manageable fiscal deficits, and low general government indebtedness testify to this,” S&P Global said.

“This track record of sustainable public finances helped the government accumulate fiscal resources to respond to the pandemic,” the report added. — Chino S. Leyco