Phl credit rating up

MANILA, Philippines – The country has received an upgrade in its credit rating outlook – to positive from stable – from the New York-based Standard & Poor’s (S&P) Ratings Services.

“We revised the outlook to positive to reflect our assessment that the Philippines’ external vulnerability has diminished. We base our view on the current external liquidity and net debt indicators against the Philippines’ relatively high public external debt, about 48 percent of which is on commercial terms,” S&P credit analyst Agost Benard said in a statement. “We expect further rating improvements to be most likely driven by improvements in fiscal and debt credit metrics.”

Bangko Sentral Governor Amando Tetangco Jr. said that with the latest upgrade, the Philippines is closer to a much deserved investment grade credit rating.

“We remain hopeful that our desired credit rating upgrade to investment grade is forthcoming,” Tetangco stressed.

“The recognition of our diminished external vulnerability because of our strong external liquidity position is well-placed,” the BSP chief added.

S&P, Benard said, also affirmed the foreign currency “BB” long-term and “B” short-term sovereign credit ratings and the local currency “BB+” long-term and “B” short-term sovereign credit ratings.

This was the fifth upgrade the country received from credit rating agencies since the Aquino administration’s assumption into office on June 30 last year.

Rising external liquidity

S&P raised the credit rating of the Philippines to two notches below investment grade from three notches on Nov. 12 last year on the back of the country’s rising external liquidity.

Last January, New York-based Moody’s Investors Service upgraded the country’s credit rating outlook to positive from stable, placing it at two notches below investment grade amid the gains made in fiscal consolidation, sustained macroeconomic stability, and robust external payment position last June 15.

This was immediately followed by London-based Fitch Ratings which upgraded the country’s sovereign rating to one notch from two notches below investment grade last June 23 on the back of the country’s strong economic growth, improving fiscal position as well as robust external payments position.

Fitch rating has put the country’s sovereign credit at one notch below investment grade while Moody’s as well as S&P rate the country’s sovereign credit at two notches below investment grade.

Benard said the country’s credit rating could be upgraded depending on how much or how far the government has gone in achieving its monetary goals.

“The ratings could be raised on material progress in achieving a sustainable structural revenue improvement or further strengthening of the public balance sheet, yielding reduced fiscal vulnerability. Conversely, the ratings could stabilize at the current level or come under downward pressure in the event of a weakened commitment to fiscal consolidation, resulting in upward tilting of the debt trajectory, or if the external liquidity position deteriorates significantly,” he added.

Reforms paying off

Finance Secretary Cesar Purisima said in a statement that the outlook upgrade reflects the country’s strength amid the present global uncertainties. He said the reforms instituted by the Aquino administration over the past 18 months have borne fruit.

“It is worth noting that this outlook upgrade is the fifth positive credit rating actions made by various agencies for the Philippines since the Aquino government took helm. We hope that this outlook improvement will translate into a much-deserved credit rating upgrade, sooner rather than later,” Purisima stressed.

However, the finance chief pointed out that despite the upgrade, the country is still underrated by international credit rating agencies.

“However, we still view that the country is still underrated by credit rating agencies despite evident and relevant gains to improve our fiscal position, debt ratios, and our overall macroeconomic picture,” he pointed out.

The Aquino administration has committed to trim the country’s budget deficit to two percent of gross domestic product (GDP) starting 2013 from 3.9 percent last year. –Lawrence Agcaoili (The Philippine Star)