S&P delivers PH's 2nd investment grade rating
05/02/2013
"The upgrade on the Philippines reflects a strengthening external profile, moderating inflation, and the government's declining reliance on foreign currency debt" - Agost Bernard, S&P credit analyst
MANILA, Philippines -- Standard & Poor's on Thursday awarded the Philippines an investment-grade rating, a month after another debt watcher upgraded the country to the much-coveted status.
In a statement, S&P said it has raised the country's sovereign credit rating to BBB- with a stable outlook from BB+ with a positive outlook.
"The upgrade on the Philippines reflects a strengthening external profile, moderating inflation, and the government's declining reliance on foreign currency debt," Agost Bernard, S&P credit analyst, said in a statement on Thursday.
"We expect the country to move into a near-balanced external position because of persistent current account surpluses, in which large net transfers from Filipinos working abroad more than offset ongoing trade deficits," he added.
S&P noted the present and previous administrations have improved the country's fiscal flexibility, decreased the share of foreign-currency debt, and deepened capital markets.
"The Philippines' improved inflation environment is also a rating support. Despite some shortcomings in monetary policy transmission, inflation is low and fairly stable, helped partly by currency appreciation," Bernard said.
But S&P stressed the country's low per capita GDP remains a rating constraint. Moreover, it pointed out the need for more infrastructure and restrictions on foreign ownership hamper economic growth.
"We may raise the ratings on evidence of government revenue reforms that facilitate needed improvements in physical and human capital, and institutional and structural reforms that boost private sector investment, including FDI," S&P said.
Ratings may be lowered, S&P warned, if the country's external performance weakens "significantly" or it fails to manage an expected surge in investments that may result in the overheating of the economy.
"We may also lower our ratings if problems at one of the large conglomerates impair investor confidence, or if political developments cause the government to veer from its commitment to improving governance," S&P said.
Fitch Ratings in March became the first debt watcher to give the country an investment grade rating, boosting business sentiment in the country.
Moody's Investors Service, meanwhile, currently rates the country a notch below investment grade at Ba1 with a stable outlook.
Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. said this upgrade "undoubtedly cements the Philippines’ status as an economy with one of the brightest prospects globally."
"With our investment grade rating, we are more confident that these inflows, particularly of more FDIs (foreign direct investments), will swing towards increasing the country’s productive capacity, thereby generating more employment and higher incomes," Tetangco said.
Finance Secretary Cesar V. Purisima, for his part, said: "For now, we must redouble our efforts to remove the remaining constraints to our growth if we are to reach even greater heights. 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 a statement, S&P said it has raised the country's sovereign credit rating to BBB- with a stable outlook from BB+ with a positive outlook.
"The upgrade on the Philippines reflects a strengthening external profile, moderating inflation, and the government's declining reliance on foreign currency debt," Agost Bernard, S&P credit analyst, said in a statement on Thursday.
"We expect the country to move into a near-balanced external position because of persistent current account surpluses, in which large net transfers from Filipinos working abroad more than offset ongoing trade deficits," he added.
S&P noted the present and previous administrations have improved the country's fiscal flexibility, decreased the share of foreign-currency debt, and deepened capital markets.
"The Philippines' improved inflation environment is also a rating support. Despite some shortcomings in monetary policy transmission, inflation is low and fairly stable, helped partly by currency appreciation," Bernard said.
But S&P stressed the country's low per capita GDP remains a rating constraint. Moreover, it pointed out the need for more infrastructure and restrictions on foreign ownership hamper economic growth.
"We may raise the ratings on evidence of government revenue reforms that facilitate needed improvements in physical and human capital, and institutional and structural reforms that boost private sector investment, including FDI," S&P said.
Ratings may be lowered, S&P warned, if the country's external performance weakens "significantly" or it fails to manage an expected surge in investments that may result in the overheating of the economy.
"We may also lower our ratings if problems at one of the large conglomerates impair investor confidence, or if political developments cause the government to veer from its commitment to improving governance," S&P said.
Fitch Ratings in March became the first debt watcher to give the country an investment grade rating, boosting business sentiment in the country.
Moody's Investors Service, meanwhile, currently rates the country a notch below investment grade at Ba1 with a stable outlook.
Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. said this upgrade "undoubtedly cements the Philippines’ status as an economy with one of the brightest prospects globally."
"With our investment grade rating, we are more confident that these inflows, particularly of more FDIs (foreign direct investments), will swing towards increasing the country’s productive capacity, thereby generating more employment and higher incomes," Tetangco said.
Finance Secretary Cesar V. Purisima, for his part, said: "For now, we must redouble our efforts to remove the remaining constraints to our growth if we are to reach even greater heights. 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."
'Upgrade shows PH is one of brightest economies in the world'
5/02/2013
MANILA, Philippines - The Aquino administration welcomed the news of Standard & Poor's upgrade of the Philippines to investment grade rating, saying it is an affirmation of its good governance initiatives and the strength of the economy.
"We welcome the upgrade, not just as the latest institutional affirmation of the Aquino administration’s good governance initiatives: it also helps enable lower costs for borrowing, which equals lower costs for hospitals, schools, and other vital structural improvements for the benefit of our people. It is further indicative of sustained confidence in the Philippine economy," presidential spokesperson Edwin Lacierda said in a statement.
Bangko Sentral ng Pilipinas Governor Amando Tetangco said said the upgrade "undoubtedly cements the Philippines' status as an economy with one of the brightest prospects globally."
Tetangco assured the BSP will remain vigilant against risks associated particularly of more FDIs.
"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," he said.
S&P on Thursday upgraded the Philippines' long-term foreign currency issuer default rating by one notch to 'BBB-' from 'BB+' with a stable outlook. S&P's move follows Fitch Ratings, which was the first ratings agency to upgrade the Philippines to investment grade last March.
With an investment grade rating from two of the three major Western credit rating agencies, the government expects Moody's, which rates the Philippines below investment grade, to follow suit soon.
Finance Secretary Cesar Purisima said the investment grade rating is a "resounding vote of confidence on the Philippines" and "that our economy's underlying soundness is on par with countries rated investment grade or higher."
For his part, Budget Secretary Florencio Abad says, "S&P’s upgrade inspires us in the Aquino administration to sustain and even escalate the pursuit of reform, especially in improving the quality and impact of public spending, increasing revenue collections, as well as lowering the cost of doing business."
'Positive progress'
Trinh Nguyen, economist at HSBC in Hong Kong, said the upgrade reaffirms the positive progress of the Philippine government.
"Fiscal consolidation efforts as well as prudent management of the economy have kept debt at a sustainable level and inflation on target. With access to more stable and cheaper funding, the government can focus on improving the infrastructure and the business environment to better capitalize the country's demographic dividend," Nguyen said.
However, some economists warned the Bangko Sentral to be mindful of the risks and challenges from capital inflows.
Bernard Aw, economist at Forecast Pte in Singapore, said the Philippines needs to do more work, particularly in the area of reforms.
"We continue to believe that the government has to make greater efforts in terms of increasing the average income level, widening and increasing the revenue base, and improving governance.
Meanwhile, the BSP has been mindful of the risks and challenges from capital inflows, and has taken several policy measures to stem strong inflows, including cutting the SDA rate by a cumulative 150 bps this year to encourage outflows and further liberalizing FX rules to improve access to dollar funding," Aw said.
Since the market has already priced in expectations of rating upgrades, Aw said the impact of the S&P action may not be as significant in terms of attracting greater capital inflows.
"Admittedly, the rating upgrade affirms the increasing attractiveness of the Philippines as an investment destination, and further puts pressure on Moody’s to join in," he said.
Eugene Leow, economist at DBS in Singapore, said more investors will have access to the Philippine market.
"Inflows have already been quite strong and are likely to remain a challenge for policy makers as foreign players become more aware of the Philippines as a viable investment destination," he said. - With a report from Reuters
Bangko Sentral ng Pilipinas Governor Amando Tetangco said said the upgrade "undoubtedly cements the Philippines' status as an economy with one of the brightest prospects globally."
Tetangco assured the BSP will remain vigilant against risks associated particularly of more FDIs.
"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," he said.
S&P on Thursday upgraded the Philippines' long-term foreign currency issuer default rating by one notch to 'BBB-' from 'BB+' with a stable outlook. S&P's move follows Fitch Ratings, which was the first ratings agency to upgrade the Philippines to investment grade last March.
With an investment grade rating from two of the three major Western credit rating agencies, the government expects Moody's, which rates the Philippines below investment grade, to follow suit soon.
Finance Secretary Cesar Purisima said the investment grade rating is a "resounding vote of confidence on the Philippines" and "that our economy's underlying soundness is on par with countries rated investment grade or higher."
For his part, Budget Secretary Florencio Abad says, "S&P’s upgrade inspires us in the Aquino administration to sustain and even escalate the pursuit of reform, especially in improving the quality and impact of public spending, increasing revenue collections, as well as lowering the cost of doing business."
'Positive progress'
Trinh Nguyen, economist at HSBC in Hong Kong, said the upgrade reaffirms the positive progress of the Philippine government.
"Fiscal consolidation efforts as well as prudent management of the economy have kept debt at a sustainable level and inflation on target. With access to more stable and cheaper funding, the government can focus on improving the infrastructure and the business environment to better capitalize the country's demographic dividend," Nguyen said.
However, some economists warned the Bangko Sentral to be mindful of the risks and challenges from capital inflows.
Bernard Aw, economist at Forecast Pte in Singapore, said the Philippines needs to do more work, particularly in the area of reforms.
"We continue to believe that the government has to make greater efforts in terms of increasing the average income level, widening and increasing the revenue base, and improving governance.
Meanwhile, the BSP has been mindful of the risks and challenges from capital inflows, and has taken several policy measures to stem strong inflows, including cutting the SDA rate by a cumulative 150 bps this year to encourage outflows and further liberalizing FX rules to improve access to dollar funding," Aw said.
Since the market has already priced in expectations of rating upgrades, Aw said the impact of the S&P action may not be as significant in terms of attracting greater capital inflows.
"Admittedly, the rating upgrade affirms the increasing attractiveness of the Philippines as an investment destination, and further puts pressure on Moody’s to join in," he said.
Eugene Leow, economist at DBS in Singapore, said more investors will have access to the Philippine market.
"Inflows have already been quite strong and are likely to remain a challenge for policy makers as foreign players become more aware of the Philippines as a viable investment destination," he said. - With a report from Reuters
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