MANILA, Philippines (UPDATED) – The Philippines got its highest credit rating to date from Standard & Poor's Global Ratings (S&P), now at BBB+, which is two notches higher than the minimum investment grade of BBB.
S&P said on Tuesday, April 30, that the upgrade was made on the back of the country's consistent economic growth, solid fiscal accounts, and good position in the external environment.
"The rating is also supported by solid government fiscal accounts, low public indebtedness, and the economy's sound external settings. These strengths will underpin the sovereign's improved creditworthiness," S&P said.
A credit rating is an estimate of the ability of a nation to fulfill financial commitments like loans. A higher credit rating indicates low risk of a credit default. (READ: INFOGRAPHIC: What a credit rating upgrade means for Filipinos)
A higher credit rating also means that lenders will lower borrowing costs, both for government and private companies.
The debt watcher noted that it may further raise the ratings over the next two years if the government makes "significant further achievements" in fiscal reforms.
Finance Secretary Carlos Dominguez III attributed the upgrade to the government's reforms.
"BBB+ is an undeniable tribute to President Duterte's unwavering commitment to bold reforms and sound economic policies as embodied in the 10-point socioeconomic agenda of the administration and his strong political will to get these tough initiatives done at the soonest," Dominguez said.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said S&P's favorable rating action is a recognition of the government's sound economic management, prudent monetary policy, and strong financial sector supervision.
"Over the years, the BSP has remained committed to its price and financial stability mandates, providing an enabling environment for the economy to flourish. Armed with a new charter that strengthens its ability to carry out its primary mandate of price stability and supervise the banking sector, the BSP will continue to lend support to the economic development goals of the country," Diokno said.
S&P projects the country's gross domestic product (GDP) to pick up this year to 6.3%, after slowing down to 6.2% in 2018. This revised GDP outlook is still lower than its previous estimate of 6.4% for 2019.
"The Philippine economy is among the fastest growing in the world on a 10-year weighted average, per capita basis – a reflection of its supportive policy dynamics and improving investment climate. The country has a relatively diversified economy with an increasingly strong track record of high and stable growth," it said.
Moreover, S&P said it expects the country's GDP per capita to rise to almost $3,400 in 2019.
"We project GDP per capita growth will average approximately 4.9% per year over 2019-2022, based on balanced contributions from private consumption and investment growth," it said.