S&P raises outlook on PH

Posted at 12/20/12 4:00 PM

MANILA, Philippines (UPDATE) - Standard & Poor's on Thursday upgraded its outlook on the Philippines' credit rating to positive.

In a statement, the debt watcher revised the outlook and affirmed the country's BB+ rating, which is one notch below investment grade.

A positive outlook means a country's rating may be raised within the next year.

"We revised the outlook to positive to reflect our reappraisal of the political and institutional factors underlying the ratings," analyst Agost Benard said in the statement.

"In our view, the current administration possesses a level of legitimacy, support, and stability that reduces political uncertainty and allows for improved legislative efficiency. This conducive political setting enables the administration to focus on its key policy objectives of fiscal consolidation, increased infrastructure provision, and poverty reduction."

S&P on July 4 upgraded the Philippines' credit rating to BB+ from the BB assigned in November 2010.

The country's revised outlook already takes into consideration its low income, weak fiscal profile and high but improving public debt and interest burden, the debt watcher said. Such were weighed against the Philippines' strong economic growth and robust external profile.

"The positive outlook reflects our more favorable assessment of the prevailing political conditions and of the administration's improved capacity to pursue its reform agenda," S&P said.

"We may raise the ratings next year on an improved government revenue structure, a continued diminished reliance on foreign currency government debt financing, or a lower government debt burden," it added.

The debt watcher also noted that the country's rating may be raised if reforms result in improved investment environment and better growth potential.

But S&P warned "we may revise the outlook back to stable if the Philippines' commitment to fiscal consolidation weakens or if the country's external liquidity position deteriorates significantly."

After the outlook on the sovereign credit rating was upgraded, S&P also revised the ratings outlook on four Philippine firms: Power Sector Assets & Liabilities Management Corp. (rated BB+); National Power Corp. (rated BB+); Philippine Long Distance Telephone Co. (rated BBB-), and Development Bank of the Philippines (rated BB+/B).

Credit ratings of the four companies were affirmed by the debt watcher.

The country is also rated a notch below investment grade by Fitch Ratings, which last June 19 maintained its BB+ rating for the Philippines with a stable outlook.

Moody's Investors Service, meanwhile, rates the country Ba2, two notches below investment grade, although it raised its outlook to positive from stable last May 29.