Phl bags another credit rating upgrade
MANILA — South Korea's National Information and Credit Evaluation Ratings Inc has joined a growing number of international credit rating firms that have ranked the Philippines as investment grade.
In a statement, the Bangko Sentral ng Pilipinas' Investor Relations Office said NICE Ratings elevated the Philippines' long-term foreign currency rating by a notch from junk status. The credit rating firm also assigned a "positive" outlook, which opens the door to another upgrade in the short term.
“The outlook is positive. It reflects the improved growth potential backed by institutional reforms and greater investment in infrastructure,” NICE Ratings said in a report.
Before this rating action, NICE Ratings held a "BB+" credit score, which is a notch below investment grade. In February last year, the Korean firm raised its outlook from "stable" to "positive," signaling the looming upgrade.
NICE joins Fitch Ratings, Japan Credit Rating Agency, Moody’s Investors Service, R&I, and Standard & Poor’s, all of which had upgraded the Philippines to investment grade. As an investment grade sovereign, the Philippines can borrow money from the international markets at lower interest rates.
BSP Governor Amando Tetangco Jr. and Finance Secretary Cesar Purisima said the latest upgrade show that the international community cannot ignore the country’s economic strengths.
“This vote of confidence acknowledges efforts to ensure the country is able to sustain improvements in the economy over the long haul,” Purisima said.
“As far as the BSP is concerned, the latest investment grade is another acknowledgment of efforts to maintain an inflation environment and a financial system conducive for business and supportive of sustainable growth,” Tetangco said.
According to NICE Ratings, the Philippines, which grew by 6 percent in the first semester, can sustain robust economic growth given government efforts to boost the manufacturing sector and to invest heavily in infrastructure.
“In order to break away from the private consumption-led growth and pursue a new growth model jointly led by investment and consumption, the government promoted manufacturing while making it a priority to enhance public governance and infrastructure,” the credit ratings firm said.
NICE Ratings said local manufacturing, said to have a high multiplier effect on the economy, grew by an average of 7.9 percent in the last four years, outpacing the 6.7percent growth for the services sector.
Another plus factor that led to the ratings upgrade is the government’s infrastructure agenda, under which public spending would grow from an equivalent of 3 percent of gross domestic product (GDP) this year to 4 percent next year and 5 percent in 2016.
NICE Ratings also cited the Philippines' strong external liquidity, stable financial markets, and improved fiscal situation.
“In the face of the sell-off of financial assets in emerging markets since May 2013, the Philippines’ financial market remained relatively stable, thanks to the strong current account position and abundant liquidity in the financial market,” the debt watcher said, citing the drop in the national government's debt from 74.4 percent of GDP in 2004 to 49.2 percent last year.
Likewise, inflation has been managed well by the BSP given its timely policy adjustments that have prevented price bubbles from developing in the property market.