Fitch ratings upgrades Philippines to investment grade

Fitch Ratings today declared the Philippines “Investment Grade,” the first-ever such rating achieved by the country from a major western credit rating agency. 

In a statement, the credit rating agency upgraded the Philippine sovereign’s long-term foreign currency rating to ‘BBB–’ from ‘BB+’, and its long-term local currency to ‘BBB’ from ‘BBB–’, with a ‘stable’ outlook on both ratings. 

Reacting to the announcement, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. in a statement thanked Fitch Ratings for the credit rating upgrade. The Governor said “the upgrade is a landmark achievement for the Philippines and is a recognition of the gains from the structural economic, financial and good governance reforms that have been implemented in the past several years.“ 

Fitch credited various factors as key drivers of the upgrade, foremost of which are the strong external balance sheet, a persistent current account surplus underpinned by remittance inflows, and the overall resilience of the Philippine economy. The agency also cited as additional factors improvements in fiscal management, and the favorable macroeconomic outturns, supported by a strong monetary policy framework under the BSP. 

Finance Secretary Cesar V. Purisima lauded Fitch’s decision which has successfully reversed a decade of decline in the Philippines’ credit ratings. 

“President Aquino’s tuwid na daan has led us to investment grade rating, another historic first under the President’s stewardship.” 
Secretary Purisima expects the investment grade rating to open up more sources of financing for Philippine businesses, lower the cost of borrowing, and encourage more investments in the country. This in turn will lead to more jobs and greater incomes for Filipinos. 

Governor Tetangco added “The upgrade to investment grade status should inspire the entire government bureaucracy and the Filipino people to capitalize on the opportunities that will arise from this positive credit rating action. We should continue to work together not only to achieve higher credit ratings but also to ensure that the gains from these benefit most of our people. From our end at the BSP, we remain committed to our mandate of maintaining a stable inflation environment supportive of economic growth, and on enhancing governance standards of financial institutions in line with the national priority of good governance,” Governor Tetangco said. 

Secretary Purisima further said “The Philippine Government remains determined to pursue tuwid na daan and to ensure that these reforms are irreversible. This is the only way we can maintain inclusive economic growth over the long-term and achieve our developmental goals.” 

Meanwhile, Claro Fernandez, Executive Director of the BSP’s Investor Relations Office (IRO) pointed out that “the straight upgrade to “BBB-“ is a testament that we have restored the confidence and trust of the market in the viability of doing business in the Philippines. Through good economic governance, which is the core of the Aquino Administration’s philosophy, we aim to sustain this momentum and continuously improve our credit profile.” 

Fitch Ratings is the first of the three major western credit rating agencies to upgrade the Philippines to investment grade status. Standard and Poor’s and Moody’s currently rate the country just a notch below investment grade. 

The Philippine government acknowledges the support of its credit ratings advisors, Standard Chartered Bank, in particular Philippe Sachs (Global Head of Public Sector), Scott Wong (Director, Sovereign and Supranationals Debt Capital Markets) and Tom Lu (Associate, Sovereign & Supranationals Debt Capital Markets).-Philippine Information Agency (March 27, 2013)