Imagine securing a loan at a lower interest rate or having a wider range of investment options. That’s the potential future for Filipinos thanks to the recent affirmation of the Philippines’ “A-” credit rating by the Japan Credit Rating Agency (JCR).

Think of a credit rating like a borrower’s report card. It assesses a country’s ability to repay its debts, impacting how much it can borrow and at what cost. Earning an “investment-grade” rating, like the Philippines’ current “A-” with a stable outlook, signifies a strong creditworthiness, making the country a reliable borrower in the eyes of international lenders.

Unpacking the Benefits

This positive rating unlocks several advantages for the Philippines. The government and businesses can borrow money at lower interest rates. Finance Secretary Ralph G. Recto emphasized this, saying, “Having a high credit rating is a major win for all as this means that the Philippines can have more access to cheaper financing from our development partners and the international capital markets.”

Lower borrowing costs free up resources that can be channeled towards development projects like infrastructure upgrades under the “Build Better More” program. 

Additionally, a high credit rating attracts foreign investments, which create jobs and stimulate economic growth. As JCR highlighted, the Philippines’ “high and sustained economic growth, buoyed by strong domestic demand” is a key strength. 

The Ripple Effect for Filipinos

The benefits of a strong credit rating trickle down to ordinary Filipinos. Lower interest rates on personal loans and mortgages could become a reality. Additionally, Filipinos with existing investments might see better returns on Philippine bonds.

Secretary Recto further elaborated, “This allows the government to channel funds that would have otherwise been allotted for interest payments towards more development programs such as more infrastructure projects, improved social services, better health care system, and quality education.” Increased foreign investments and infrastructure spending can also translate into more employment opportunities for Filipinos.

Maintaining the Momentum

The Philippines’ robust economic growth (expanding by 5.6% in 2023 but falling short of the government’s target of 6% to 7%) and commitment to fiscal consolidation efforts, as outlined in the Medium-Term Fiscal Framework, were key factors contributing to the positive credit rating. The government must prioritize maintaining sound economic policies to ensure the Philippines retains its investment-grade status.

JCR believes “the growth rate in 2024 will be around 6%, supported by a recovery of external demand and tourism demand, and solid private consumption underpinned by a subdued rise in prices and stable flow of remittances from overseas Filipinos.” 

The Philippines’ high credit rating presents a bright outlook for the country and its citizens. As JCR projects continued economic growth in 2024, Filipinos can look forward to a future with potentially lower borrowing costs, more investment opportunities, and a stronger economy.Ⓒ