A-grade rating for PH seen in near term

May 14, 2019

An economist of a Philippine-based private universal bank forecasts an A-grade credit rating for the Philippines in the next two to three years due to sustained robust growth of the domestic economy, as well as the demographics dividends.

In an interview by the Philippine News Agency, Rizal Commercial Banking Corporation Economics and Industry Research Division head Michael Ricafort said the domestic economy is among those that have been posting strong growth in recent years.

Although the six percent growth trend was interrupted in the first quarter of 2019 due to the impact of the delayed approval of the 2019 national budget, Ricafort said he expects the economy’s high growth momentum to continue.

“It’s more likely because the country has been on demographic sweet spot since majority of the population, or at least 53 million, are already part of the working age. The country is the last to enter that phase in 2015,” he said.

In the first quarter this year, growth, as measured by gross domestic product, grew by only 5.6 percent after years of posting over six percent expansion.

Because of the proven robustness of the economy along with healthy external payments position, various credit rating agencies have elevated the Philippines to investment grade since 2013.

Last April 30, S&P Global Ratings upgraded its ratings on the country to BBB+ with Stable outlook, a notch shy from A-grade, due to the country’s healthy external payments position, contained fiscal deficits and stable public indebtedness.”

“I think it’s reasonable to expect (an upgrade to A-grade rating) in another two to three years because of course it’s already relatively high,” Ricafort said.

The economist said that demographic dividend will surely help provide a solid footing to the domestic economy “because you’re talking about a very productive population in whatever capacity they are in.”

“Bottom line they have income, they have spending power, they start families, they buy homes, they buy vehicles, they start businesses. When they start families they would send their children to school so the impact on consumer spending is tremendous,” he added.