"The upgrade on the Philippines reflects a strengthening external profile, moderating inflation, and the government's declining reliance on foreign currency debt," Standard & Poor's credit analyst Agost Benard noted in an e-mailed statement to media outlets.
“The outlook is stable,” the debt-watcher noted, signifying the rating is not likely to change in the next 18 months.
S&P is the second debt-watcher to give the country an investment grade after Fitch Ratings raised the country's sovereign rating last March 27.
In prasing the latest upgrade, Malacañang said the government can now borrow for less in financing for hospitals, schools, and other vital structural improvements that benefit Filipinos.
"It is further indicative of sustained confidence in the Philippine economy: of our collective resilience, optimism, and growing potential, amidst global economic uncertainty, borne not just on the shoulders of discipline and prudence that has marked the economic policies of the Aquino administration, but also on the hard work and dedication of the Filipino people," Malacañang noted.
Bank of the Philippine Islands economist Emilio Neri Jr. said the latest investment grade rating will result in more money coming into financial markets.
"Markets will pose gains as some fund managers follow indices that only include countries with investment grade rating. Now, these fund managers that were waiting for confirmation will try to get a hold of some Philippine assets—equities, bonds, local and foreign currency issues both by corporations and the sovereign government," he told GMA News Online.
An investment grade rating helps strengthen industries that in turn create more jobs, but the Philippines must work on investment hurdles to fully seize the opportunity, Neri noted. "The right investments in the real economy usually follow an investment grade rating.
“Now, it's a challenge for both the government and private sector that the Philippines will not become an exception to the rule," he added.
An investment grade rating lowers the cost of government and private sector borrowings, which could lead to easier funding for investments. It stokes investor confidence in the Philippines supports the assessment that the country has strong macroeconomic fundamentals and the capacity to pay-off debts.
Inflation remained within the central bank's target and is expected to settle at 3.2 percent this year unchanged from last year.
'Brightest prospects globally'
"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," Benard also said.
In a separate statement, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the latest 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," he added.
Fiscal consolidation has reduced government debt to a projected 47 percent of gross domestic product this year, S&P noted.
The debt-watcher noted the past and present administration's initiatives toward a better fiscal position. "The current and previous administrations improved fiscal flexibility through restraining expenditures, reducing the share of foreign currency debt, deepening domestic capital markets, and more recently through modest revenue gains," it said.
S&P, however, said income levels in the country remain low compared to its peer neighbors int eh region.
"The Philippine economy's low income level remains a key rating constraint," said S&P, noting that the Philippines per capita income is projected at $2,850 in 2013 which "is below that of most similarly rated sovereigns."
"I would like to thank Standard and Poor's for their upgrade of the Philippines to Investment Grade rating, from BB+ to BBB- with a stable outlook, today," Finance Secretary Cesar Purisima said in a separate statement.
On receiving news of the announcement, Finance Secretary Cesar Purisima thanked the 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 in another statement, adding that the investment grade rating "is another resounding vote of confidence on the Philippines." — VS, GMA News
source: gmanetwork.com
