MANILA, Philippines – International debt watcher Standard & Poor’s has raised the Philippines’ credit rating to a notch below investment grade, citing mainly the country’s improving fiscal position and debt level.
S&P raised the Philippines long-term sovereign foreign currency rating to BB+, putting it at par with the local currency rating. The outlook on the ratings is stable.
“The foreign currency rating upgrade reflects our assessment of gradually easing fiscal vulnerability as the government’s fiscal consolidation improves its debt profile and lowers its interest burden. The rating action also reflects the country’s strengthening external position, with remittances and an expanding service export sector continuing to drive current account surpluses,” S&P said in a statement.
S&P said any further upgrade will depend on “our appraisal of improving political and institutional factors or evidence of a sustainable structural revenue improvement.”
Conversely, it said it may lower the ratings if “government’s commitment to fiscal consolidation weakens, resulting in rising debt or if external liquidity position deteriorates significantly.”
The latest upgrade is the 8th positive ratings action under the Aquino administration, according to Finance Secretary Cesar Purisima.
“This only gives us more confidence to continue with the work that we have started towards macroeconomic stability, fiscal sustainability, and inclusive economic growth,” he said.
“We can now clearly make our case for an investment grade status,” he added.
S&P’s upgrade came two weeks after another ratings agency, Fitch Ratings, decided to keep its credit ratings for the Philippines. Fitch also rates the country one notch below investment grade.
Among the major credit raters, only Moody’s Investors Service rates the Philippines two notches below investment grade.
The Aquino administration is eyeing to attain the country’s first investment grade before its term ends in 2016.
Better ratings will translate to lower borrowings costs for the country as investors are less likely to command high interest rates on debts to compensate for the risk of default. – Rappler.com