'Phl to get investment grade by 2013'

MANILA, Philippines - The Philippines is well on its way to achieving investment grade by next year, an investment bank said in a new report on Wednesday.

In its Daily Breakfast Spread, Singapore-based DBS Bank Ltd. noted the government’s “impressive” debt management that allowed it to secure eight positive credit rating actions during the first two years of the Aquino administration.

It said national government debt as a proportion of gross domestic product (GDP) has declined from as high as 74.4 percent in 2004 to a 13-year low of 50.9 percent by end last year.

GDP is the sum of all products and services created in an economy. A lower debt-to-GDP ratio indicates that the country has more resources to settle its obligations. Latest data showed the debt-to-GDP ratio further dipped to 50.5 percent as of the first semester.

“Therefore, it is not surprising that it won multiple upgrades from credit rating agencies over the past two years,” DBS said in its report released today.

“An investment grade rating is definitely a possibility in 2013,” it added.

The Aquino administration has been batting for an investment grade, which, if granted, is expected to lower our borrowing costs and boost foreign investments in the country.

So far, the highest credit rating of the country came from Fitch Ratings and Standard & Poor’s Ratings Services, which rank us one notch below investment grade with stable outlooks. The other major debt watcher, Moody’s Investors Service, put us two notches below but with a positive forecast.

A positive forecast means the country could be upgraded in the next 12 to 18 months.

Aside from declining government debt ratios, DBS said the country has also enjoyed dwindling foreign liabilities “in part due to the strength of the peso.” It said foreign debt just accounted to 35.8 percent of total outstanding debt as of July, from 39 percent in early 2011.

The national government has also been a prudent budget manager, it said, with the deficit expected to fall to just 2.4 percent and two percent of GDP this year and the next, respectively. Last year, deficit-to-GDP ratio hit 2 percent of economic output.

“Moreover, foreign reserves actually rose over the course of this year despite the slowing of inflows into Asia that resulted in many countries actually seeing foreign reserves stagnate or even decline,” the report said. Reserves amounted to a record-high of $80.8 billion as of August, data showed.

“A solid (first half) economic growth figure and strong external finances are key reasons for attracting continued inflows,” it added.

The local economy grew by 6.1 percent as of June, slightly above the government’s five- to six-percent target for the year.