Philippines may win credit rating upgrade
Standard & Poor's Ratings Services has revised the rating outlook on the Philippines to positive from stable, indicating a possible upgrade.
The foreign currency 'BB' long-term and 'B' short-term sovereign credit ratings are affirmed. The recovery rating remains '3', which denotes the expectation of a 50-70 per cent recovery in the event of a distressed debt exchange or payment default.
"We revised the outlook to positive to reflect our assessment that the Philippines' external vulnerability has diminished," said Standard & Poor's credit analyst Agost Benard, in a statement released today.
"We base our view on the current external liquidity and net debt indicators against the Philippines' relatively high public external debt, about 48 per cent of which is on commercial terms. We expect further rating improvements to be most likely driven by improvements in fiscal and debt credit metrics."
The ratings on the Philippines encompass its relatively low income level, weak fiscal profile, and high, albeit improving, public debt and interest burden. These aspects are balanced by a robust external liquidity position and a track record of moderately strong growth with low variability.
"The ratings could be raised on material progress in achieving a sustainable structural revenue improvement or further strengthening of the public balance sheet, yielding reduced fiscal vulnerability," said Benard. "Conversely, the ratings could stabilise at the current level or come under downward pressure in the event of a weakened commitment to fiscal consolidation, resulting in upward tilting of the debt trajectory, or if the external liquidity position deteriorates significantly."
