S&P upgrades Philippines' credit rating
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The Philippines has obtained the highest credit rating in its history in recognition of the reforms undertaken by the administration of President Benigno Aquino, which have allowed the country to outperform its Southeast Asian neighbours in terms of econo
Standard & Poor’s on Thursday announced a fresh rating upgrade for the Philippines’ long-term peso and dollar bonds. From the previous rating of “BBB-”, S&P now rates the Philippines at “BBB”, one notch above minimum investment grade.
This is the best grade the Philippines has ever received from any of the three major credit-rating agencies.
“This is further proof of President Aquino’s belief that good governance is good economics,” said Finance Secretary Cesar Purisima. “We will continue to institutionalise good governance so our country’s economic growth is both sustainable and inclusive.”
S&P said it expected recent reforms that had paved the way for the country’s economic boom to be sustained beyond Aquino’s term.
“We expect ongoing reforms on a broad range of structural, administrative, institutional and governance issues to endure beyond the term of the current administration,” it said in a statement.
A sovereign rating is the credit rating of a government and serves as an indicator for the perceived health of a national economy as well as its attractiveness to foreign investors. This is in addition to the more immediate effect of lowering the interest costs of the government and local corporations whenever they borrow funds from overseas.
S&P is one of the so-called Big Three credit-rating agencies that make these evaluations. The other two are Moody’s Investor Service and Fitch Ratings.
Last year, Philippine gross domestic product expanded by 7.2 per cent, faster than the previous year’s 6.8 per cent and better than the government’s goal of 6-7 per cent for the year.
The country’s growth was also the fastest among all major Southeast Asian economies – and despite the damage caused by Typhoon Yolanda last November in large parts of the Visayas, which most observers expected would lead to a sharp slowdown in growth.
This year, the government has an ambitious growth target of 6.5-7.5 per cent. By 2016, it aims to drive economic growth to as much as 8.5 per cent.
“The Philippines proved that it is able to sustain high economic growth despite external volatility and, in the case of last year, successive domestic natural disasters,” Bangko Sentral ng Pilipinas governor Amando Tetangco said in a statement.
“This rating upgrade is also a recognition that the structural reforms that we have put in place continue to gain traction, as demonstrated by the significant improvements in the country’s position in international governance and competitiveness surveys,” the central bank chief said.
S&P said it was optimistic that the gains in revenue generation, spending efficiency and improvements in public-debt profile and the investment environment would be sustained under the next administration, regardless of who succeeds Aquino.
Before Thursday’s upgrade, the government’s economic managers had already expressed optimism about another upgrade from credit-rating agencies, since investors both at home and abroad had already been pricing Philippine debt instruments at rates that are equivalent to those of higher-rated nations.
Reforms implemented since 2010 have focused mainly on improving transparency and accountability in government, in line with the goal of promoting economic growth and poverty reduction.
Among these reforms are the Bureau of Internal Revenue’s efforts to plug the loopholes in the country’s tax regime, as well as the agency’s crackdown on tax evaders.
Last year, the budget deficit stood at the equivalent of 1.4 per cent of GDP.
