The central bank expressed confidence that other credit rating agencies would recognize the Philippines’ sound macroeconomic fundamentals and further upgrade its investment rating after last week’s rating action by Standard & Poor’s Ratings Services (S&P).
S&P on May 8 raised the country’s long-term sovereign credit rating to BBB from BBB- with a stable outlook. The latest upgrade follows S&P’s rating action in May 2013, when it assigned the Philippines an investment grade rating.
In an e-mail to reporters, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said that the central bank “remains positive that the other credit rating agencies will recognize, just as S&P has, the continued sound macroeconomic fundamentals of the country,” particularly sustained economic growth amid low and stable inflation and the robust external position.
Tetangco expressed confidence that credit ratings agencies such as Moody’s Investors Services and Fitch Ratings would also recognize the governance and structural reforms that have been implemented by the government which have resulted in significant improvements in the country’s standings in global governance and competitiveness surveys.
“We believe this recognition would happen sooner rather than later,” he said.
Fitch and Moody’s both rate the Philippines at minimum investment grade, one notch lower than S&P’s new score.
Meanwhile, the BSP governor said that the S&P upgrade should help global markets continue to “differentiate” when it comes to investments, adding that the central bank expects new inflows as a result of the country’s new investment grade rating.
Tetangco also said the Monetary Board’s decision to further hike the reserve requirement ratio of banks by 1 percentage point to 20 percent was “timely,” as it could now help mitigate any growth in liquidity that may be generated by more investment inflows arising from the rating upgrade.
“With respect to inflows in general, our policy will continue to be geared towards ensuring that inflows do not generate financial stability concerns. This is consistent with what we have done in the last two meetings,” he said.
Tetangco also said that the expected investment inflows from the credit rating upgrade should help support the peso.
The local currency on Friday last week hit its highest level in nearly five months as it closed at P43.65 against the US dollar, appreciating from Thursday’s P44.19. Friday’s level was the peso’s strongest since December 16, 2013, when it settled at P44.15. However, it depreciated slightly by 6 centavos when it closed at 43.71 to the dollar on Monday.
“As is our policy, we will maintain presence in the market as appropriate, while keeping the exchange rate broadly determined by market forces,” Tetangco said.