The Philippines today received investment grade rating from international credit rating agency Standard & Poor’s. In a statement released by the agency, the country’s sovereign long-term foreign currency rating was upgraded from “BB+” to “BBB-“ with stable outlook. This upgrade by S&P comes after the Philippine sovereign received its first investment grade rating from Fitch Ratings in March this year.
Receiving news of the announcement, Secretary of Finance Cesar Purisima thanked the credit rating agency for the upgrade. “We are very pleased that S&P, along with Fitch, has also now affirmed the Philippines’ strong economic and fiscal gains,” Purisima said, adding that the investment grade rating “is another resounding vote of confidence on the Philippines.” Secretary Purisima further said that “good governance—tuwid na daan—is bringing structurally sustainable growth for the Philippines” and that “the Philippine Government will continue to focus on infrastructure development, on creating a larger fiscal space to support social investments, and on further opening up the economy.”
In its press release, S&P cited the following key drivers for the upgrade: strengthening external profile, moderating inflation and the government’s declining reliance on foreign currency debt. S&P highlighted that the “Philippines has built a substantial foreign exchange reserve buffer through having a long record of current account surpluses, along with modest net foreign direct investments (FDI) inflows and net portfolio equity inflows. The buffer makes for low refinancing risk and an import cover ratio well above prudential norms.” S&P also cited the country’s improved fiscal flexibility through restraining expenditures, reducing the share of foreign currency debt, deepening domestic capital markets, and more recently through modest revenue gains.
Governor Amando M. Tetangco Jr. of the Bangko Sentral ng Pilipinas (BSP) said the S&P upgrade “undoubtedly cements the Philippines’ status as an economy with one of the brightest prospects globally.” Governor Tetangco also assured that the BSP will remain vigilant against risks associated with greater inflows. “With our investment grade rating, we are more confident that these inflows, particularly of more FDIs, will swing towards increasing the country’s productive capacity, thereby generating more employment and higher incomes,” the Governor stated.
Executive Director Claro Fernandez of the BSP’s Investor Relations Office (IRO) also reiterated that this latest rating action by S&P “is another key institutional recognition that the Aquino administration’s good governance framework is resulting in tangible and long-term economic benefits.”
With two of the three major Western credit rating agencies granting the Philippines investment grade status, the Philippine Government expects Moody’s, which still rates the country a notch below investment grade, to soon follow suit.
The Philippine government acknowledges the support of its advisors, Standard Chartered Bank, in particular Philippe Sachs (Global Head of Public Sector), Scott Wong (Director, Sovereign and Supranationals Debt Capital Markets), and Tom Lu (Associate, Sovereign & Supranationals Debt Capital Markets).