S&P Affirms PHL’s ‘BBB’ Rating

Debt rater Standard & Poor’s (S&P) affirmed its investment grade rating on the Philippines on back of the country’s strong macroeconomic fundamentals, which is seen to further lift domestic growth and income.

It currently gives the country a ‘BBB’ rating, the level after the minimum investment grade, with ‘stable’ outlook.

S&P elevated the country to investment grade in May 2013 and elevated it to another notch a year after.

In a report, the credit rater said the outlook on the rating “reflects our expectation that the key economic, fiscal, external, and monetary credit measures for the Philippines will continue to improve.”

“The ratings on the Philippines reflect our assessment of its strong external position, which features rising foreign exchange reserves, and low and declining external debt,” it said.

The country’s average growth in recent year has risen to around six percent from about three percent in the past.

This has resulted to rise in real per capita income, which S&P projects to post a faster rate of 4.4 percent this 2016 from year-ago’s 4.1 percent.

The report cited that government reforms in the last six years are already institutionalized, thus, its impact will be felt even with the entry of a new government .

“Our affirmation of the ratings is premised on the new administration after the May 2016 elections having a strong mandate to continue to pursue orthodox fiscal, economic, and development policies,” it said.

In terms of the country’s fiscal health, S&P expects this to remain sound citing that Philippines “external metrics are strong.”

It projects the country’s current account surplus to be maintained “reflecting robust services exports, large remittance inflows, and lower oil prices.”

It also said that young population the country currently enjoys along with educated and flexible labor market is a plus as this “imply further strength in services exports over the next five years.”

It also pointed out that “participation in free trade agreements could provide further upside to the Philippines upside to the Philippines’ export earnings.”

The central bank’s ability to help support economic growth while ensuring a sound and stable banking system is a “broadly neutral to our ratings” it said, noting that the planned interest rate corridor (IRC) , scheduled in the second quarter of the year, “will improve the effectiveness of monetary policy transmission.”

”In our opinion, a deeper and more diversified financial and capital market would further improve the effectiveness of policy transmission and facilitate improved credit metrics,” it added.(PNA) JMC/JSV/PJN