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Japan Credit Rating Agency affirms ‘A-’ rating but warns of delayed economic recovery

The Japan Credit Rating Agency Ltd. (JCR) has affirmed the Philippine credit rating at ‘A-’ with a stable outlook, but noted the delayed economic recovery as the spread of the Delta variant has caused a surge in COVID-19 cases.

In a statement released Monday, JCR said both the foreign and local currency long-term issuer ratings were ‘A-‘ with a stable outlook, indicating that the country has a “high level of certainty to honor the financial obligations.”

The Philippines first scored the ‘A-’ rating in June 2020, when it said the economic downturn was likely to be “limited.”

“The ratings mainly reflect the country’s high and sustainable economic growth performance underpinned by solid domestic demand, its resilience to external shocks supported by an external debt kept low relative to GDP and the accumulation of foreign exchange reserves, the government’s solid fiscal position, and a sound banking sector,” JCR said.

The Philippines reported a 32-year-high economic growth of 11.8% in the second quarter, following five straight quarters in negative territory. When compared with the previous quarter, however, this is 1.3% lower.

The country’s debt-to-GDP ratio is programmed at 59% this year, and projected to increase to 60% in 2022.

S&P Global Ratings in May kept its long-term sovereign credit rating on the Philippines at 'BBB+' with a stable outlook, but flagged risks such as the government's rising debt.

“At the moment, recovery of economic activities is being delayed due to re-strengthened mobility restrictions forced by the resurgence of the COVID-19 including the delta variant,” JCR said.

The Philippines on Monday carved a fresh record-high daily tally of 22,415, bringing the country’s active cases to 159,633. The total caseload is now at 2,103,331 which includes 34,337 deaths and 1,909,361 recoveries.

“JCR does not consider that the fiscal soundness will be impaired because while the fiscal deficit has widened, the support package at this time is backed by appropriate fiscal policies and the government debt will remain comparatively subdued,” JCR said.—LDF, GMA News