By Mayvelin U. Caraballo and Catherine S. Valente Reporters
Credit rating agency Standard & Poor’s (S&P) on Thursday upgraded the Philippines’ sovereign long-term foreign currency rating from BB+ to BBB+.
This is the second investment grade rating the country received this year after the upgrade from Fitch Ratings in March. S&P and Moody’s are the two biggest rating agencies in the world, with Fitch considered a distant third.
In its statement, S&P cited the country’s strengthening external profile, moderating inflation and the government’s declining reliance on foreign currency development as the key drivers for the upgrade.
“(The) Philippines has built a substantial foreign exchange reserve buffer through having a long record of current account surpluses, along with modest net foreign direct investments (FDI) inflows and net portfolio equity inflows. The buffer makes for low refinancing risk and an import cover ratio well above prudential norms,” it said.
Malacañang welcomed the S&P upgrade of the Philippines. In a statement, Palace
spokesman Edwin Lacierda said that this affirms the good governance initiatives of President Benigno Aquino 3rd on the “tuwid na daan.”
“Tuwid na Daan [straight path]is truly the path to progress and tangible improvements in our economic life,” he said
“[It’s] not just as the latest institutional affirmation of the Aquino administration’s good governance initiatives: It also helps enable lower costs for borrowing, which equals lower costs for hospitals, schools, and other vital structural improvements for the benefit of our people,’” he added
S&P also mentioned he country’s improved fiscal flexibility through restraining expenditures, reducing the share of foreign currency debt, deepening domestic capital markets, and more recently through modest revenue gains.
Finance Secretary Cesar Purisima thanked the credit rating agency for the upgrade and said that the government is very pleased that S&P has also now affirmed the Philippines’ strong economic and fiscal gains.
He added that the investment grade rating “is another resounding vote of confidence in the Philippines.”
On the other hand, the Bangko Sentral ng Pilipinas through Governor Amando Tetangco said that the S&P upgrade undoubtedly cements the Philippines’ status as an economy with one of the brightest prospects globally. Tetangco also assured that the BSP will remain vigilant against the risks associated with greater inflows.
“With our investment grade rating, we are more confident that these inflows particularly more FDIs, will swing toward increasing the country’s productive capacity, thereby generating more employment and higher incomes,” he said. Lacierda said it is also indicative of the sustained confidence in the country’s economy.
“It is further indicative of sustained confidence in the Philippine economy: of our collective resilience, optimism, and growing potential, amid global economic uncertainty, borne not just on the shoulders of discipline and prudence that has marked the economic policies of the Aquino administration, but also on the hard work and dedication of the Filipino people,’ he added
“The news spread quickly among ordinary people who took ownership of the good news, which is a sign of how good news and optimism are truly contagious, contributing to positive national mood and the can-do, increasingly empowered attitude of the nation,’ he added.