A month after the Philippines obtained its first investment-grade lift, Standard and Poor's Ratings Services on Thursday also upgraded the country to above-junk status.
In a report, S&P said it raised its sovereign credit ratings on the Philippines to 'BBB-/A-3' from 'BB+/B'. The rating firm assigned a stable outlook, which means the new credit score will hold for at least the next six months to a year.
S&P also raised the country's long-term Asean regional scale rating to 'axA-' from 'axBBB+', the transfer and convertibility assessment to 'BBB' from 'BBB-', and affirmed its Asean regional scale short-term rating of 'axA-2'.
"The upgrade on the Philippines reflects a strengthening external profile, moderating inflation, and the government's declining reliance on foreign currency debt," said S&P credit analyst Agost Benard.
"We expect the country to move into a near-balanced external position because of persistent current account surpluses, in which large net transfers from Filipinos working abroad more than offset ongoing trade deficits," he said.
Finance Secretary Cesar V. Purisima said this ratings action is another vote of confidence and affirms the market's recognition that the Philippine economy's "underlying soundness" is on a par with countries that are already considered investment grade.
“We are very pleased that S&P, along with Fitch, has also now affirmed the Philippines’ strong economic and fiscal gains, progress that has been made thanks to the discipline and prudence in financial management instilled by President Aquino in his administration. Truly, good governance—tuwid na daan—is bringing structurally sustainable growth for the Philippines!" Purisima said.
"For now, we must redouble our efforts to remove the remaining constraints to our growth if we are to reach even greater heights. The Philippine Government will continue to focus on infrastructure development, on creating a larger fiscal space to support social investments, and on further opening up the economy," he added.
Trade Secretary Gregory L. Domingo said the upgrade "is a tremendous stamp of approval by ratings agencies on the good governance agenda of PNoy [that] will further support the continued rush of investment."
Socioeconomic Planning Secretary Arsenio Balisacan said S&P's move "should further strengthen the confidence of the investment community on the economy," adding that, "It is a recognition that the governance and economic fundamentals of our country for medium to long term growth are strong."
"In the medium to long term, investment growth is what drives expansion of employment opportunities. Poverty can't be licked for good without employment growth," he added.
Budget Secretary Florencio Abad said the Aquino administration would maximize the benefits of the credit rating upgrade since this would bring down the cost of borrowing for the country.
“[This will] eventually widen our fiscal space especially for infrastructure spending. An investment grade credit rating also lowers our country’s risk profile, which could help us attract more investors and create more jobs," he said.
In a statement, Malacañang said S&P's upgrade would translate to "lower costs for hospitals, schools, and other vital structural improvements for the benefit of our people."
"It is further indicative of sustained confidence in the Philippine economy: of our collective resilience, optimism, and growing potential, amidst 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," the Office of the Presidential Spokesperson said.
Businessmen welcomed S&P's move, the second since Fitch Ratings last month gave the Philippines its first investment grade rating.
S&P's upgrade is "[d]efinitely another plus that will make the Philippines more prominent in the radar screen of investors and fund managers looking for an investment destination," said Management Association of the Philippines (MAP) president Melito S. Salazar Jr.
"This is a welcome development. All improvements in the country's global ratings are good for business," said American Chamber of Commerce of the Philippines (AmCham) senior adviser John D. Forbes.-Interaksyon (May 03, 2013)
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