Upgrade of the Philippines’ credit rating into investment grade

Economic managers are hoping for the eventual upgrade of the Philippines’ credit rating into investment grade following Friday’s upgrade by Standard and Poor’s (S&P) of the country’s ratings outlook to positive.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. in a text message to reporters, said “the outlook upgrade brings us a step closer to what the market has been pricing our external debt at as evidenced by our credit default swaps.”

“The recognition of our diminished external vulnerability because of our strong external liquidity position is well-placed,” he stressed.

“We remain hopeful that our desired credit rating upgrade to investment grade is forthcoming,” he added.

To date, S&P rates the country’s foreign currency sovereign credit rating at “BB”, two notches below investment grade, while its local currency rating for the country is now at “BB+”.

Aside from the upgrade of the country’s credit rating outlook, S&P also the ‘axBBB+/axA-2’ ASEAN regional scale ratings on the sovereign citing that “the recovery rating remains ‘3’, which denotes our expectation of a 50-70 percent recovery in the event of a distressed debt exchange or payment default. The transfer and convertibility assessment (T&C) is ‘BB+’.”

Relatively, Finance Secretary Cesar Purisima said the government welcomes S&P’s upgrade of the country’s credit rating outlook.

He, on the other hand, pointed out that “we still view that the country is still underrated by credit rating agencies despite evident and relevant gains to improve our fiscal position, debt ratios, and our over-all macroeconomic picture.”

“Clearly, this adjustment from S&P reflects the Philippines’ strength amid the present global uncertainties, thanks to the reforms the Aquino administration had instituted for the past 18 months since it took over.

He said this latest development is the fifth rating action by the various ratings agencies since the assumption of the Aquino administration in 2010.

“We hope that this outlook improvement will translate into a much-deserved credit rating upgrade, sooner rather than later,” he added.

It can be recalled that last June Fitch Ratings upgraded one notch higher its long-term foreign currency issuer default rating (IDR) on the Philippines to “BB+” from “BB-“, which made the country a notch away from investment grade, after citing the government’s fiscal consolidation and strong external position.

It also upgraded to “BBB-“, an investment grade, from “BB+” the country’s long-term local currency IDR and the country ceiling. Outlook on these ratings is “stable”. IDR on the country’s short-term foreign currency was affirmed at ‘B’.

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