Fitch: Phl one step away from investment grade

MANILA, Philippines - The Philippines received another credit rating upgrade under the Aquino government, this time from London-based Fitch Ratings that upgraded the sovereign rating by one notch from the previous “BB” to “BB+” following the country’s strong economic growth.

This is the fourth upgrade received by the Philippines since President Aquino assumed office in June 2010. This is also the second credit rating upgrade given to the country in just a span of two weeks.

Fitch Asia Pacific sovereigns team head Andrew Colquhoun said the long-term foreign currency issuer default rating of the Philippines has been upgraded to “BB+” a notch below investment grade from “BB” or two notches below investment grade, while its long-term currency issuer default rating and the country ceiling have been raised to “BBB-“ or investment grade from ‘BB+’ and its short term issuer default rating has been affirmed at “B.”

Colquhoun said the credit rating outlook of the Philippines was stable.

“The upgrade reflects progress on fiscal consolidation against a track record of macro stability, broadly favorable economic prospects and strengthening external finances,” he stressed.

Monetary and fiscal authorities welcomed the rating upgrade from Fitch Ratings that has kept the country’s credit rating at three notches below investment grade or “BB” since June 2003.

“The Fitch upgrade by one notch is very significant in that Fitch rating has been unchanged in the last eight years notwithstanding the remarkable strides in the economy during the same period,” Bangko Sentral ng Pilipinas deputy governor Diwa Guinigundo said.

Guinigundo said the ratings upgrade constitutes a clear recognition of the country’s macrofundamentals could no longer be ignored.

“Our growth story is more solid and our future path is clearly brighter than originally believed,” he said.

BSP Governor Amando Tetangco Jr. said in a statement that the central bank would continue to adopt appropriate monetary policy that would keep prices stable while remaining supportive of the country’s growth targets.  

He added that the BSP would also remain resolute in effectively managing the country’s external position, which has been providing the economy a healthy buffer against external shocks, to ensure continuing macroeconomic stability.

“The Philippines’ strengthening credit profile continues to be internationally recognized by both markets and the rating agencies. Today’s upgrade from Fitch Ratings brings the Philippines one notch closer to investment grade status and is a clear acknowledgement of the country’s improving macroeconomic fundamentals,” Tetangco said.

Finance Secretary Cesar Purisima said in a separate statement that the upgrade is another affirmation of President Aquino’s agenda and leadership as well as a concrete and objective vote of confidence that the Philippines is headed in the right direction.

“The Fitch upgrade is the fourth positive ratings action in the 11 months of the Aquino administration and is unprecedented in Philippine history. We are now just one notch away from our goal of investment grade and we will strive to attain that at the soonest possible time,” Purisima stressed.

He said that the international credit raters are finally noticing the country’s commitment to fiscal consolidation.

“It is encouraging to see the rating agencies acknowledge the improvements we have initiated to strengthen our fiscal position. The Aquino administration will continue to push for more reforms that promote fiscal sustainability and translate this to inclusive growth toward the fulfillment of President Aquino’s social contract to the Filipino people,” he added.

Last June 15, New York-based Moodys Investors Service raised the country’s credit rating to “Ba2” or two notches from “Ba3” or three notches below investment grade amid the gains made in fiscal consolidation, sustained macroeconomic stability, and robust external payment position.