Malacañang’s enthusiasm on credit rating upgrade unwarranted-IBON

May 4, 2019

by IBON Foundation

IBON executive director Sonny Africa said that the recent credit rating upgrade is not a sign of economic progress and that Malacañang’s enthusiasm is greatly unwarranted. The credit rating upgrade is most of all an assessment of the government’s ability to repay debt and not of economic development. There would be no such upgrade if development were a concern, he said, because the economic conditions of the people are getting worse.

Big Three credit-rating agency Standard & Poor’s recently gave the Philippines a BBB+ credit rating upgrade, which is only one step away from a single “A” grade. Palace spokesperson Salvador Panelo reacted by praising the economic team for “a splendid job in putting the economic house in order and spearheading bold economic reforms [and] bolstering the domestic economy”.

The Palace’s enthusiasm is however unwarranted, Africa said, because the economy cannot be said to be doing well. The country has been getting credit upgrades for over a decade since March 2009 and has been receiving investment upgrades for over six years since March 2013, yet the economy cannot be said to be in good shape.

If anything, he pointed out, the Duterte watch so far is seeing the worst job creation in nine administrations and six decades. “This looks to get even worse after four straight quarters now of falling employment creation including two quarters of job losses,” said Africa. “As it is, the PSA’s latest January 2019 labor force survey shows 387,000 less employed Filipinos now than in the same period last year.”

The upgrade is then not from any economic progress, Africa pointed out, but largely on the back of the regressive TRAIN law, which since last year has disproportionately burdened the majority poorest Filipinos.

Africa stressed that the importance of the upgrade in stimulating capital inflows shouldn’t be exaggerated as indicating economic progress either already in place or yet to come. The economy is clearly not progressing because jobs are being lost rather than created, he said. This is so because the agricultural and industrial foundations the economy so desperately needs are being neglected for short-term Build, Build, Build infrastructure illusions, Africa explained.

Africa went on to say that more capital flows will also not mean progress if much of this will just go to financial and speculative sectors rather than the real economy. “The supposed easier availability of capital from abroad will be really only be meaningful if the country had solid industrial policy and an agricultural development plan in place, which unfortunately it does not,” he concluded.