PHILIPPINE economic managers said the country’s strong macroeconomic fundamentals will be its ticket to achieve ‘A’ ratings from the three major credit watchers—Standard and Poor’s, Fitch Ratings, and Moody’s Investors Service.
The statement was issued after S&P maintained the country’s long-term, foreign currency rating of “BBB.”
In a report over the weekend, the ratings firm said it expects the economy to remain on a solid growth trajectory given its sound fundamentals. It also assigned a “stable” outlook on the “BBB” rating, which is one notch above the minimum investment grade which was bestowed to the Philippines in May last year.
The government’s top economic said that as far as credit standing is concerned, the next aim for the Philippines would be to achieve ratings within the “A” category.
For S&P, the minimum rating within the A category is A-. This is two notches above the Philippines’ current rating of BBB.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. noted that after the Philippines secured investment grades from all major credit watchdogs in 2013, the next sensible target for the economy would be to reach the “‘A’ category” within the next few years.
“On the part of the BSP, efforts to further improve the regulatory environment for financial institutions, maintain price stability, and strengthen external payments position would be its contributions to placing the economy on an even higher gear,” Tetangco said.
PH still ‘underrated’
For his part, Finance Secretary Cesar Purisima said this goal should be attainable, especially since the Philippines still remains underrated if one would compare the country’s credit ratings with how the market prices Philippine debt papers.
“If compared with those of other emerging markets, fundamentals of the Philippines are one of the strongest. And with continually improving major credit indicators, including debt manageability, credit ratings ideally should adjust accordingly,” he said.
At the moment, the Philippines is rated a notch above the minimum by both S&P and Moody’s. The economy has the minimum investment grade with Fitch.
“Throughout the past five years of pursuing initiatives toward good governance, we have managed to outperform even our own targets and expectations. Moving forward, we expect to sustain the reform momentum and to raise the bar even higher. We have seen the benefits of a reform-oriented leadership; we should see more gains ahead,” Purisima concluded.
In its statement over the weekend, S&P cited a host of factors that are likely to keep the positive trend for the Philippines, including the country’s strong external payments position, improved fiscal situation, stable financial system, within-target inflation, robust domestic consumption, and young labor market.
“The outlook is stable, reflecting our expectation that the Philippines’ credit metrics will continue to improve, leading to gains in its key economic, fiscal, external, and monetary credit measures,” the ratings firm said.
S&P projects that the government’s budget deficit, a key indicator of creditworthiness, will average at a modest 1 percent of gross domestic product from 2015 to 2019, similar to the average posted in 2010 to 2014 and way better than the average of 4 percent recorded in the decade prior to 2010.
It also expects the country to continue posting surpluses in its current account, averaging 4.7 percent of GDP annually up to 2019.