South Korean credit firm upgrades Philippines’s rating by one notch

The Philippines got another ratings upgrade from South Korean-based NICE Investors Service, which hiked by a notch its investment grade rating for the country. 

This is the 24th positive ratings action on the country in the last five-and-a-half years, boosted by the governance reforms and infrastructure development among others.

In a statement, NICE said it now gives the country a “BBB-”rating with “stable” outlook from “BBB” due to “improved government transparency as well as enhanced environment backed by expanded infrastructure and social overhead capitals in the form of public-private partnerships.”

Infrastructure investment by the government has risen to five percent of gross domestic product (GDP) this 2016 from about 1.8 percent in 2010.

Also, some $4.8 billion worth of infrastructure contracts have been secured under the government’s public-private partnership (PPP) initiative.

NICE considers the Philippines to be more resilient compared to similarly-rated peers in terms of shocks, such as the cooling Chinese economy and market volatility due to US interest-rate normalization.

“Considering its trade structure and strong FX (foreign exchange) liquidity, the impact of global economic uncertainties such as the slowdown of the Chinese economy and US interest rate hike will be manageable,” it said.

The debt rater projects a 6.3 percent output for the domestic economy over the short and medium-term.

BSP Governor Amando Tetangco Jr. said this latest rating upgrade “resonates the process of economic strengthening that the Philippines has undergone over the years.”

“Contributory to this process were forward-looking monetary policy, proactive bank supervision, and prudent external accounts management, which have played crucial roles in promoting a stable inflation environment and a strong financial system,” he said.

Also, Finance Secretary Cesar V. Purisima said the “virtuous cycles result from dogged discipline, even when political headwinds seem too strong.”

He said the “expanded fiscal space has opened up a Pandora’s box of opportunities in infrastructure, allowing us to play a fast game of catch-up with our neighbors.”

“With increased transparency, we have empowered citizens who participate in the process of governance, and who—having known the gains reforms can bring—will refuse to roll back progress,” he added.

Investor Relations Office (IRO) Executive Director Editha Martin said the improvement in the country’s credit ratings “provided concrete benefits for the economy, including improved business confidence and reduced borrowing cost for the government.”

She explained that the lower borrowing cost resulted to the similar drop in commercial lending rates, thus, boosting consumption and investments.

“Having reaped the gains of investment grade sovereign credit ratings, there should be no room for the economy to slide back. The Filipino people, as it is incumbent upon them, are expected to demand from our leaders the kind of governance that will ensure that the economic transformation of the Philippines over the last half decade transcends changes in political settings,” she added.