Economist: PH likely to get a rating upgrade

Posted at 10/19/12 4:57 PM

MANILA, Philippines - While Standard & Poor's says the Philippines still needs to overcome some hurdles before it can get investment-grade status, a Bloomberg analyst believes it's only a matter of time. 

"The Philippines is well in investment grade actually. If you compare where it's ratings are versus where this instrument is being priced against 50 countries, the Philippines is most likely to get an upgrade... I do think its a matter of time. The Philippines is a great place to be, especially over the long run and there's an immense untapped potential in the country, especially in the mining sector," Michael McDonough, Bloomberg economist, told ANC.

The Philippines' current rating from S&P and Fitch is one notch below investment grade, while Moody's places the country two notches behind although with a positive outlook.

Investment grade status means that the three primary rating agencies in the world perceive a country to be a safe investment. This would lead to lower borrowing costs for the Philippines.

While some traders are already pricing in an upgrade to investment grade for the Philippines, 

McDonough said there are certain pension funds and money managers that are not allowed to invest in a country unless it is investment grade.

"Speculative money could come in quickly but could also get out quickly, so once you get investment grade, you get more of these long-term money managers who will put money for longer. So you don't have to worry about them getting the money out as quickly," he said.

He noted that the euro zone crisis and weakness in the US economy may have led ratings agencies to be more careful in giving upgrades.

"If you look at what is going on in the world right now, its not very positive. So I'm not surprised if the rating agencies would come out and say we're not doing this upgrade yet...And it's not per se, the Philippines' fault. It lies on places like Europe and US. There's just a lot of uncertainty out there. Unfortunately, these external factors are impacting the decision not to do the upgrade," McDonough said. 

The Aquino administration, which has enjoyed 8 positive credit rating actions in the last 2 years, has been pushing for an investment grade status. - With ANC