Philippines needs 6-7% growth to achieve ‘A’ credit rating — Recto

The Philippine economy must grow by an average of 6-7% in the next four years and meet its fiscal targets to achieve an “A” credit rating, Finance Secretary Ralph G. Recto said.

“For as long as we grow 6-7% annually for the next four years, for as long as the deficit is reduced consistently for the next four years, for as long as our debt-to-GDP (gross domestic product) [ratio] continues to go down, we will get a credit upgrade,” he told a Senate hearing with the Development Budget Coordination Committee.

Economic managers are targeting 6-7% GDP growth this year, 6.5-7.5% in 2025 and 6.5-8% from 2026 to 2028.

The government aims to achieve an “A” level rating before the end of the Marcos administration in 2028.

In June, Fitch Ratings kept the Philippines’ “BBB” investment grade rating, with a “stable” outlook. A “BBB” rating indicates low default risk and reflects the economy’s adequate capacity to pay debt.

The Philippines also holds investment grade ratings of “Baa2” from Moody’s Ratings and “BBB+” from S&P Global Ratings. Both assigned a “stable” outlook to their ratings.

“We want to go even higher, which is ‘AA’ or even ‘A,’” Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. told senators.

With a higher credit rating, the Philippines could lower borrowing costs and attract more foreign investments, he added.   

He said the government must focus on macroeconomic stability, fiscal sustainability, and good governance to achieve an “A” credit rating.

“In recent engagements with credit rating agencies, it’s the governance aspect that needs to be addressed,” Zeno Ronald R. Abenoja, Managing Director at the BSP’s Department of Economic Research Monetary and Economics Sector.

Mr. Abenoja said the government has made progress in ensuring transparency and accountability in the budget process and implementation.

Mr. Recto said achieving the government’s targets under the revised medium-term fiscal framework would also help the Philippines secure a better credit rating.

The passage of pending revenue measures in Congress, namely the excise tax on single-use plastics, rationalization of the mining fiscal regime, package 4 of the Comprehensive Tax Reform Program, and amendments to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act would help ensure macroeconomic stability, Mr. Recto said. — Beatriz Marie D. Cruz