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PHL ripe for a credit rating upgrade - BSP


Citing the continued improvement in the country’s fundamentals along with external payments position and the banking system among others, an official of the Bangko Sentral ng Pilipinas (BSP) said the Philippines is ripe for a credit rating upgrade.

“If the path of our economy will not change I think we have sufficient basis to be confident that we shall receive a credit upgrade, which we deserve,” BSP Deputy Governor Diwa Guinigundo told reporters Wednesday.

Guinigundo said that based on their study, the country’s credit rating was two to three notches below the current level.

Recently, Standard & Poor’s Ratings Services upgraded its rating outlook on the country to positive from stable after citing that the country susceptibility to negative external developments has ebbed.

The ratings agency has also affirmed the country’s foreign currency rating of 'BB' (long-term), two notches below investment grade, and 'B' short-term sovereign credit ratings and the local currency 'BB+' long-term and 'B' short-term sovereign credit ratings.

It also affirmed 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+'.”

S&P may upgrade the country’s credit rating in the next six to 12 months on back of “material progress in achieving a sustainable structural revenue improvement or further strengthening of the public balance sheet, yielding reduced fiscal vulnerability."

It, however, noted that "the ratings could stabilize at the current level or come under downward pressure in the event of a weakened commitment to fiscal consolidation, resulting in upward tilting of the debt trajectory, or if the external liquidity position deteriorates significantly.”

In June 2011, 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’.

During the same month, Moody’s upgraded a notch higher to “Ba2” with “Stable” outlook its credit rating on the country.

This was made after Moody’s changed its rating outlook on the Philippines to positive from stable in January of 2011 on back of the domestic economy’s resiliency.

In November last year, S&P upgraded a notch higher the country’s long-term foreign currency sovereign credit rating to “BB”, two notches below investment grade, with stable outlook from “BB-/stable outlook” due mainly to the increasing dollar reserves of the country as well as the improving growth prospects.

Guinigundo noted that Fitch was almost immovable” in the past years in terms of the its assessment of the country’s credit rating but cited that “they nudged. They moved.”

He remains hopeful that Fitch would continue to see the necessity to upgrade the country’s credit rating.

He said that even one slot higher from Fitch “is still a good one.”

“Whatever it is an improvement from the current initial condition is welcome. But we deserve an investment based on our assessment,” he said.
The central bank official said a credit rating upgrade would result in lower borrowing cost for the government, which would redound to more fund for government projects and programs as well as lower debt spread.

“That is why it is important to be really concerned of our credit rating,” he said.

By Joann Santiago

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