S&P upgrades Philippines’ credit rating

MANILA, Philippines — International debt watcher S&P Global Ratings on Tuesday raised the Philippines’ credit rating, citing the country’s “strong growth trajectory” and sustainable public finances.

S&P upgraded the Philippines’ long-term sovereign credit rating  from “BBB” to “BBB+” — or two notches above investment grade rating — with a “stable” outlook.

This is so far the highest credit rating that the Philippines has received.

A higher rating can lower the cost of borrowing in foreign currencies for the Philippine government and private companies in the country.

In a statement, S&P said it may raise the Philippines’ ratings over the next two years if the government makes further significant achievements in its fiscal reform program, or if the country's external position improves and institutional settings get better.

It also said the Duterte government has so far achieved “partial success” with its Comprehensive Tax Reform Program — which seeks to help fund the administration’s massive “Build, Build, Build” infrastructure program — but noted that opposition to some components of the broader tax reform program has been “intense.”

Meanwhile, S&P warned that a downgrade could be triggered if the state’s fiscal program “leads to much higher-than-expected net general government debt levels,” or if real gross domestic product growth declines significantly.

After the government operated on a reenacted outlay, S&P said more delays in the enactment of a new budget in future could be considered as credit negative.

“We raised the rating to reflect the Philippines' strong economic growth trajectory, which we expect to continue to drive constructive development outcomes and underpin broader credit metrics over the medium term,” S&P said.

“The rating is also supported by solid government fiscal accounts, low public indebtedness, and the economy's sound external settings,” it added.

“The Duterte administration has successfully carried over the constructive economic and fiscal policies of the previous government, and has adopted a more aggressive expenditure program to address the country's considerable infrastructure shortfall.”

S&P excpects the Philippine economy to grow 6.3% this year from 2018’s actual 6.2%, before picking up to 6.5%, 6.6% and 6.7% in 2020, 2021 and 2022, respectively.