Manila: The Philippines has achieved its highest sovereign credit rating to date – an "A-" rating, upgraded from last year’s BBB+.
The Japan-based Rating and Information Inc. (R&I) awarded this new rating in August 2024, reflecting growing investor confidence in the country's economic resilience.
A sovereign credit rating is a measurement of a state’s ability to repay its debts.
Just like personal credit scores, a high credit rating indicates a borrower with low credit risk, and a low rating indicates a government that might struggle to repay its debts.
“This upgrade is proof of the strong confidence investors have in the vibrancy of our economy,” Philippine President Ferdinand Marcos Jr. announced on Saturday in a statement on his social media accounts.
• An "A-" rating from R&I signifies that the country or entity being rated has a strong ability to meet its financial commitments.
• This rating indicates a relatively low risk of default, suggesting that the country or entity is financially stable and reliable.
• However, it also suggests that while the creditworthiness is solid, there are some factors or potential vulnerabilities that could impact the ability to meet obligations under certain economic conditions.
A- rating reflects a high level of confidence in the entity's financial health, though it is not at the very top of the rating scale, at "AAA".
In Q2 2024, the Philippine economy grew by 6.3 per cent, faster than the revised 5.8 per cent in Q1 2024 and 4.3 per cent in the April-to-June period last year.
In June 2024, credit rating agency Fitch kept a “BBB” rating for the Philippines, with a “stable” outlook.
What credit rating upgrade means
The R&I upgrade could credit rating upgrade would also have a broader impact on the economy:
- Significantly lower borrowing costs, enabling the government, businesses, and consumers to access cheaper financing.
- Allow more investments in the country, creating more jobs, and potentially leading to the rise of winners in manufacturing, including semiconductors, and services, such as outsourcing.
“The continuous improvement in our credit rating will attract more investments and create more businesses in our country, leading to quality jobs and higher incomes for every Filipino,” he added.
Inclusive
Marcos Jr said the country is just getting started on the path to inclusive growth.
“Although this is the first credit rating upgrade under my administration, we won’t stop here. We will continue striving to ensure that every Filipino benefits from economic growth until we break the cycle of poverty.”
According to the Presidential Communications Office (PCO), the upgrade is a result of sustained economic growth, prudent fiscal management, a stable banking sector, and resilient private consumption.
$ 104 b
Philippine gross international reserves as of end-May 2024The country's gross internetional reserves level is equivalent to 7.7 months’ worth of imports of goods and payments of services, according to the Philippine central bank BSP. This is also 6.1x the country’s short-term external debt based on original maturity and 3.7x based on residual maturity.
Jump in investments
The Philippine Statitics Authority (PSA) reported on Thursday that foreign investment commitments jumped 220.7 per cent to 190 billion pesos in the April-June 2024, compared to the same period in 2023.
Moreover, the country's ability to control inflation within the 2-4 percent target range, manage the knock-on effects of natural disasters and external risks, and strategically position itself in the global economy and supply chain were also key factors.
Semiconductor manufacturing
“Our inclusion in the US semiconductor supply chain is a game-changer, opening up new investment opportunities and reinforcing our strategic position on the global stage," the PCO stated.
Semiconductor companies contribute to the global supply chain for various electronic components and devices. Following are five leading semiconductor manufacturing companies in the Philippines:
1. Texas Instruments (TI) Philippines
- Location: Baguio City and Clark, Pampanga
- Production: TI is one of the largest semiconductor manufacturers in the Philippines, producing a wide range of analog and embedded processing products. They specialise in microcontrollers, digital signal processors, and analog ICs used in various electronic devices.
2. ON Semiconductor Philippines
- Location: Carmona, Cavite
- Production: ON Semiconductor manufactures power management, analog, sensors, and standard logic devices. Their products are used in automotive, computing, communications, industrial, LED lighting, medical, military, and aerospace applications.
3. Amkor Technology Philippines
- Location: Muntinlupa City and Laguna
- Production: Amkor Technology is a leading provider of semiconductor assembly and test services. They specialise in advanced packaging solutions, including “flip chip”, wafer-level packaging, and system-in-package (SiP) technologies, catering to various industries.
4. Integrated Micro-Electronics Inc. (IMI)
- Location: Laguna and Cebu
- Production: IMI is a global leader in electronics manufacturing services, including the production of advanced semiconductor packaging, sensors, power modules, and printed circuit board assemblies (PCBAs). They serve industries such as automotive, industrial, aerospace, and medical electronics.
5. Analog Devices Inc. (ADI) Philippines
- Location: General Trias, Cavite
- Production: Analog Devices specializes in high-performance analog, mixed-signal, and digital signal processing (DSP) integrated circuits (ICs). Their products are used in a wide range of applications, including automotive, healthcare, industrial automation, and communications.
These entities contribute to the global supply chain for various electronic components and devices.
