Philippines gets another credit rating upgrade
MANILA, Philippines - The Philippines on Wednesday received another credit-rating upgrade.
This time, Japan-based R&I raised the Philippines' long-term foreign-currency issuer rating by a notch to BBB from the minimum investment grade of BBB-, with a stable outlook.
A stable outlook which means it is unlikely to change within a year.
R&I maintained the country’s short-term debt rating at a -2, which indicates high certainty that short-term financial obligations would be paid.
"The Philippines’ economy continues to show strong growth, thanks to brisk investment coupled with private consumption driven by remittances from overseas Filipinos.. This should allow for relatively high growth and raise per-capita income levels steadily," R&I said in a report.
The Philippines' per-capita income has been modest compared to more advanced neighbors, but is now catching up. From $3,684 in 2009, per capita income in the country (using current prices and purchasing power parity) increased to $4,649 last year.
R&I also noted the Philippines' healthy fiscal situation.
“Savings in interest payments, thanks to fiscal consolidation, help the government to finance infrastructure projects. Budget execution is also expected to accelerate,” it said.
For instance, R&I said the government's budget for infrastructure is 40 percent more this year at P404.3 billion.
Also, the rollout of more public-private partnership (PPP) projects would help boost investments.
"Furthermore, public-private partnerships, which utilize private capital [for funding public infrastructure], are underway, albeit gradually, and will likely boost investments,” R&I said.
The government has awarded contracts for the P1.72-billion automated fare collection and single ticketing system for the MRT and the LRT, and the P17.5-billion Mactan Cebu International Airport expansion project, this year. This brings to seven the total number of PPP projects so far.
R&I also noted the Philippines' sound macroeconomic fundamentals, including ample foreign-exchange reserves, improving manageability of government debt, and within-target inflation.
It also cited the Aquino administrations' reforms, which it hopes will be sustained beyond 2016.
"There is risk that the next government will not be as reform-minded as the Aquino administration. However, pressures from growing international relationships, such as the establishment of the ASEAN Economic Community in 2015, along with public expectation for sustained reform initiatives, should deter the post-Aquino government from going backwards,” it said.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. welcomed the credit-rating upgrade from R&I.
"The upgrade is an expression of confidence, in part, on the ability of the Monetary Authority to implement appropriate and timely measures that ward off threats to the economic stability we are enjoying. The BSP will continue to craft policies that will help maintain this stability," he said.
"Reforms that this government has started to institutionalize help ensure that the positive momentum will not falter... On the fiscal front, administrative and policy reforms implemented by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) will make it easier in the future to keep the growth trend in public revenues,” Finance Secretary Cesar Purisima said.
Investor Relations Office (IRO) Executive Director Editha Martin said the country’s upward movement in the credit-ratings scale bodes well for raising the country’s international profile as an investment destination.
Three major credit-rating agencies have upgraded the Philippines to investment grade in 2013.
Standard & Poor’s Ratings Services and Fitch Ratings assigned the Philippines with a “stable” outlook. Moody’s Investors Service gave the Philippines a “positive” outlook.