Phl gets second investment grade

MANILA, Philippines - The Philippines has received its second credit rating upgrade in just over a month – this time from Standard & Poor’s Ratings Services (S&P).

In a statement, S&P said yesterday its credit rating for the country went up a notch to BBB- with a stable outlook.

Fitch Ratings raised its rating for the Philippines to the same level last March 27.

“This investment grade rating is another resounding vote of confidence on the Philippines and an affirmation of what the markets already recognize – that our economy’s underlying soundness is on par with countries rated investment grade or higher,” Finance Secretary Cesar Purisima said. “For now, we must redouble our efforts to remove the remaining constraints to our growth if we are to reach even greater heights.”

For Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., the S&P upgrade “undoubtedly cements the Philippines’ status as an economy with one of the brightest prospects globally.” 

Of the three major credit raters, only Moody’s Investors Service placed the country one notch below investment grade, at Ba1. But it stressed its “positive” outlook, and hinted at upward revision soon.

“We are very pleased that S&P, along with Fitch, has also now affirmed the Philippines’ strong economic and fiscal gains, progress that has been made thanks to the discipline and prudence in financial management instilled by President Aquino in his administration,” Purisima said. 

“Truly, good governance – tuwid na daan (straight path) – is bringing structurally sustainable growth for the Philippines,” he added.

“This momentous achievement is cause for celebration, but be assured that no one in public service rests on this laurel. Rather, we are spurred on ever harder to build a better Philippines, for today and tomorrow,” the Finance chief said.

“Once again, I salute S&P for recognizing the strength and possibility of our country and our economy. Their seal of approval is symbolic of the new standard that Filipinos can come to expect from their government,” he added.

The latest upgrade has put the Aquino administration on track in its goal of bringing the country to investment grade territory this year. With the development, more foreign investments are expected to come in and more credit avenues are expected to open up.

“The upgrade on the Philippines reflects a strengthening external profile, moderating inflation, and the government’s declining reliance on foreign currency debt,” S&P credit analyst Agost Benard said in a statement.

The New York-based agency also raised its ratings for the BSP, the National Power Corp. and the Private Sector Assets and Liabilities Management.

The peso strengthened to a near three-week high after the S&P announcement at 3:44 p.m. and closed at P41.05 to a dollar yesterday.

In raising the country’s creditworthiness, S&P noted the Philippines’ “substantial” foreign reserves, comprising mostly dollar investments and remittances. Reserves stood at $84.1 billion as of the first quarter, data showed.

The government’s balance sheet has also remained in check, S&P said, helping reduce the need to borrow – consequently lowering debt levels. As of March, the budget deficit stood at P66.478 billion, or below forecast.

“The Philippines’ improved inflation environment is also a rating support. Despite some shortcomings in monetary policy transmission, inflation is low and fairly stable, helped partly by currency appreciation,” Benard said.

Consumer prices were at 3.2 percent as of March, or still within the central bank’s three- to five-percent target for the year.

A low per capita income – a measure of how much growth has been distributed to the population – remains a key rating constraint, S&P said.

Based on its estimates, the country’s per capita income can rise to $2,850 by year-end.

S&P also said its rating for the country is likely to further improve if proposed measures designed to generate more revenues and allow more foreign investments are enacted into law.

“We may also lower our ratings if problems at one of the large conglomerates impair investor confidence, or if political developments cause the government to veer from its commitment to improving governance,” it added, without elaborating. With Zinnia dela Peña