...the PH extraordinary upgrades

PH rating upgrades 'extraordinary'

 

 

Written by JIMMY CALAPATI

Malaya Business News Online  

Published on Friday, 10 May 2013

 

[The upgrade on the Philippines] is probably one of the fastest paths we have ever seen to investment grade,” - Mahendra Gursahani, StanChart Philippines CEO

 

 

 

How extraordinary these upgrades have been.

That is how Philippe Sachs, global head of Standard Chartered Bank’s public sector client coverage group, describes the fast climb of the country’s credit rating from “junk” to “investment grade”.
Sachs was enlisted by the Philippine government through the Investor Relations Office to be the country’s credit advisor for Fitch Ratings and Standard and Poor’s.

Fitch gave last March the country’s first investment grade rating. S&P followed last week.

“We basically placed on average for a country to be moved to take over a year. It happened way, way faster—BB+ to investment grade (on the average) 133 days. That is less than half a time from what you experienced elsewhere,” Sachs, who is based in Singapore, said in a video-conference yesterday.
So how difficult is it to graduate to investment grade?

Sachs said that out of the 127 sovereigns S&P monitors, only three countries graduated to investment grade in a short time.

“The hurdle is very high and the Philippines, from our analysis, is one of the few upgraded three notches within three years to investment grade,” Sachs said.

Mahendra Gursahani, StanChart Philippines CEO, said the rating agencies are “naturally more circumspect.”

“I think they take a longer term view, once they give it, the last thing they want to do is to call it wrong. They are naturally cautious… [The upgrade on the Philippines] is probably one of the fastest paths we have ever seen to investment grade,” Gursahani said.

Sachs said that the back-to-back upgrades were because, among other factors, the country’s continuous growth for the past years.

“You have accelerated growth in 2012 while growth has been slowing elsewhere. It’s really a phenomenal and unique outcome,” Sachs said.

For 2014, the government is targeting a GDP growth of between 7 and 8 percent.

Last year, the economy grew by 6.6 percent, almost twice bigger than 2011’s 3.9 percent but slightly lower than 2010’s 7.3 percent, a 30-year high.

Going forward, Sachs said that the agencies are looking for continued investments in productive sectors of the economy that will create jobs.

“Stable economy at the most. You got pretty strong and resilient growth, it’s not so much of a function of downside shocks per se, they will be looking at next generation of reforms,” he said.

Sachs and Gursahani said that key industries include tourism, business process outsourcing and the government’s private-public partnership.

“[They will look at] more foreign direct investments, more job creation,” Sachs said.

He also noted that the Philippines from a GDP per capita basis is lower compared to others in the same rating which means more the government should be able to provide more jobs.

Sachs said that the job is “pro bono.”

“[We] try to help [the sovereigns] engage the global community, to help countries tell their story. If the Philippines rises, we rise at the time as well,” Sachs said.

StanChart has been operating in the Philippines for 140 years, making it the second oldest foreign bank in the country.

“I would like to think that [the upgrade] will make a huge difference. [It will] make people come here,” Gursahani said.

“We spend a lot of time selling the Philippines, the promise of the Philippines. Three years ago, when we began working as a ratings advisor, the Philippines has a very unique situation…quite rare from all rating agencies,” Sachs said.

But Sachs said that there’s no better ambassador to the Philippines that the Filipino people.