S&P raises credit rating outlook on Philippines

MANILA, Philippines – International debt watcher S&P Global Ratings raised its outlook for the Philippine economy, citing strong economic growth, healthy external position, and improving policy making.

The debt watcher upticked the country’s credit rating outlook to “positive” from “stable,” signaling an upgrade in the current rating of BBB, a notch above the minimum investment grade, over the next 24 months.

“The positive outlook reflects our view that improvements to the Philippines’ policy-making settings could support a track record of more sustainable public finances and balanced growth over the next 24 months,” S&P said in a report late Thursday, April 26.

A higher credit rating translates to more foreign investments, lower borrowing cost for both the government and private sectors, among others. (READ: Fitch upgrades Philippines’ credit rating)

Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr said these favorable credit rating actions “are a welcome pat on the back.”

Pat on the back

Espenilla said the BSP is committed to its price and financial stability mandates to provide an environment conducive for economic growth and stability over the years.

“At the same time, the BSP is keen on helping push the economy toward the next stage of development through financial sector reforms, which are vital for accelerating growth and making it more inclusive,” Espenilla said.

S&P said its ratings balance its assessment of the “Philippines’ strong external position and limited general government indebtedness” against its “lower-middle income economy and pressing infrastructure needs.”

The debt watcher gave plus points to the country’s “effective fiscal policies,” citing “improvements to the quality of expenditures, still-limited fiscal deficits,” among others.

The Philippines has booked 76 straight quarters of economic growth. (READ: INFOGRAPHIC: What a credit rating upgrade means for Filipinos)

Economic managers see the Philippines posting a 7% to 8% gross domestic product (GDP) growth this year, from 6.7% in 2017.

S&P said the passage of the first package of the Comprehensive Tax Reform Program (CTRP) under Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law will ensure that finances remain sustainable while the country addresses pressing infrastructure needs.

“CTRP is partially intended to fund the administration’s Build Build Build scheme, through which the government plans to significantly boost infrastructure spending,” S&P said.

S&P added BSP’s monetary policy measures would improve the effectiveness of monetary policy transmission.

The country’s central bank last raised interest rates by 25 basis points in September 2014. – Rappler.com