June 6, 2012, Philippine Star
MANILA, Philippines – Investment banks see the Philippines achieving a credit rating upgrade within the next three to six months but the much-coveted investment grade rate is unlikely to be attained until the next two years.
Prakriti Sofat, economist at London-based Barclays Capital Ltd, said the country is likely to receive a one-notch upgrade either from Standard & Poor’s or Moody’s Investors Service within the second half of the year.
London-based Fitch Ratings rates the country’s sovereign credit at one notch below investment grade while Moody’s as well as S&P rate the country at two notches below investment grade.
“We continue to expect the Philippines to receive a one-notch upgrade in the coming three to six months, catching up with Fitch,” Sofat stressed.
Late last month, the Aquino administration received its sixth upgrade barely in the first half of his six-year term after Moody’s upgraded the credit rating outlook of the Philippines to positive from stable.
Sofat said the outlook change was driven by continued fiscal and debt consolidation, and the government’s enhanced financing ability.
Furthermore, Moody’s pointed out that the key triggers for ratings upgrade include structural improvement in revenue mobilization, continued reduction in the government debt burden, and the acceleration in investment spending under the public-private partnership (PPP) program.
Singapore-based financial market analysis provider Forecast Pte economist Radhika Rao stressed the need for the Philippines to pass new tax measures to improve revenue collections and attract more investments to achieve an investment grade rating.
“However shift to the enviable investment grade will require sustained improvement in revenue collections, higher investments and further improvements in the debt to GDP ratio; a shift is unlikely before next year,” Rao stressed.
She pointed out that rating agencies have already noted the improvement in the country’s debt and risk metrics and are already positive on the growth prospects.
“Often the economy is compared with Indonesia, with the recent slowdown in investments into the Philippines often cited as an area that needs to be addressed. Structural constraints alongside pervasive corruption likely contributed to the infrastructure bottlenecks in recent years, however the government’s intention to address these problems head-on is noteworthy,” she said.
Philippine fiscal and monetary authorities made a pitch for a much coveted investment grade rating during the 45th annual meeting of the Board of Governors of the Asian Development Bank (ADB) held in the country early last month.
Finance Secretary Cesar Purisima said during the conference that the Philippines was four notches below the bond market implied rating.
“Not that I am appealing, these are some of the aberrations that need to be considered by the credit rating agencies,” the finance chief stressed during the forum.
