What is credit rating?
Answer (2)
Credit rating is like a report card for a country’s ability to pay back money it borrows. If a country has a good credit rating, it means it is trusted to pay back loans on time, so it can borrow money more easily and with lower interest. During President Benigno “Noynoy” Aquino III’s time (2010–2016), the Philippines' credit rating improved because the government was careful with spending and focused on reducing debt, stopping corruption, and improving the economy. Investors saw that the country was being managed well, so they trusted it more. Because of this, big credit rating agencies like Moody’s, Fitch, and S&P gave the Philippines higher grades—similar to getting straight A’s in school.But under President Rodrigo Duterte (2016–2022), the credit rating started to weaken. While the economy still grew, some of his policies—like strong political moves, unpredictable decisions, and a heavy focus on infrastructure using loans—made some investors nervous. Also, during the COVID-19 pandemic, the government borrowed a lot of money to help the country recover, which increased the country’s debt. Because of this, credit agencies became more cautious, and although the rating did not crash, it was no longer improving like before.
A credit rating is an evaluation of a person’s or organization’s ability to repay borrowed money. It reflects their creditworthiness based on factors like past borrowing, repayment history, and financial stability. Lenders and investors use credit ratings to decide how risky it is to lend money or invest. Higher credit ratings mean lower risk, while lower ratings indicate higher risk.A country’s credit rating affects its ability to borrow money from international lenders and investors. A higher credit rating means the country is seen as more reliable and can borrow at lower interest rates, making it cheaper to fund projects and manage debt. A lower credit rating signals higher risk, leading to higher borrowing costs, which can strain the country’s finances, slow economic growth, and reduce investor confidence. So, a good credit rating helps a country attract investment and maintain economic stability.
