S&P upgrade to hasten policy easing — Diokno

The recent positive action on the Philippines’ credit score by S&P Global Ratings may speed up the “inevitable” reduction in the Bangko Sentral ng Pilipinas’ (BSP) key policy rates and lenders’ required reserves.

In a televised interview with ANC, BSP Governor Benjamin E. Diokno said the debt-watcher’s decision to raise the country’s credit rating to “BBB+,” a notch below the lowest “A” grade, may encourage faster easing in key rate and the reserve ratio.

Diokno, who assumed the central bank chief post in March, has repeatedly signaled an openness to cut the key interest rate and banks’ required reserves, which at 18 percent is the

highest in Southeast Asia.

He said in an interview on April 27 that a rate cut is just a matter of timing.

A one-percentage point cut every quarter on the reserve ratio is still on the table, ANC said on its Twitter account, citing Diokno.

The governor also said in the TV interview that between oil prices and El Nino, he’s more concerned about a prolonged dry spell.

Last week, S&P upgraded the Philippines’ investment grade credit rating status amid the country’s above-average economic growth, healthy external position along with sustainable government finances.

“We raised the rating to reflect the Philippines' strong economic growth trajectory, which we expect to continue to drive constructive development outcomes and underpin broader credit metrics over the medium term,” S&P said.

“The rating is also supported by solid government fiscal accounts, low public indebtedness, and the economy's sound external settings,” the rating agency added.

S&P also noted the Duterte administration has “successfully carried over the constructive economic and fiscal policies of the previous government, and has adopted a more aggressive expenditure program to address the country's considerable infrastructure shortfall.”

Meanwhile, the Philippines’ Investor’s Relations Office said that the positive credit rating action by S&P is “a vote of confidence” and affirmed the country’s creditworthiness.

The upgrade from S&P follows sustained robust economic growth — which has consistently settled above the 6.0percent mark for the last 15 quarters despite global economic challenges. It comes after the continued exercise of fiscal discipline as the government invests more in much needed infrastructure and human capital development.

The upgrade recognizes implementation of vital policy and infrastructure reforms seen to fuel robust, sustainable, and more inclusive economic growth for the Philippines.

Major reforms include laws on tax reform, liberalization of the rice sector, and strengthening of the BSP’s charter, as well as initiatives to increase the ease of doing business and relax the foreign investment negative list. (With Bloomberg report)