S&P upgrades PHL’s debt rating to BB

International credit ratings agency Standard & Poor’s (S&P) raised the Philippines’ debt rating on Friday, making it the first rating upgrade for the Aquino administration. S&P attributed this rating upgrade to the country’s strong external liquidity, growth prospects, and improving debt ratios. The global debt watcher’s foreign currency sovereign credit rating on the Philippines raised it to BB — a stable rating — from BB-. The one-notch rating upgrade brings the Philippines to two levels below the “investment grade" — a grade that Indonesia and Vietnam currently hold. “We have upgraded the Philippines based on its steadily improving external liquidity profile and the underlying strengths of its external accounts, which increasingly mitigate the vulnerabilities posed by still high public and external debt, and provide buffer against adverse shifts in terms of trade or investor sentiment," Agost Benard, S&P credit analyst, said in a statement. S&P said the upgrade shows the development the Philippines has achieved in debt reduction and fiscal consolidation. “Positive structural features of the current account and prudent exchange rate management afford an enhanced ability to accumulate a reserve buffer, which has been an evolving credit strength for the Philippines," Bernard said. “This and a manageable foreign debt amortization schedule combine for increasingly strong external liquidity, compared to similarly rated sovereigns," he added. S&P pointed out that the narrow revenue base and high incidence of tax evasion in the Philippines have been the principal contributing factors to weak public finances. The government therefore needs to advance its revenue measures for more long-term improvements in its revenues, the ratings agency said. S&P said: “We could raise the ratings on evidence of sustainable structural revenue improvement, or further strengthening of the external balance sheet, and reduced vulnerability to shocks." S&P warned that it could lower the ratings if the government’s commitment to fiscal consolidation weakens, resulting in an upward debt trajectory or if the external liquidity position deteriorates. Economic managers thus welcomed S&P debt rating for the Philippines. “The one-notch upgrade is a testament to our economic and fiscal stability, and more importantly to the new administration’s credibility and integrity. They recognize President Aquino’s resolve to reform long standing issues that have handicapped the Philippine economy in the past," Finance Secretary Cesar Purisima said. Budget Secretary Florencio Abad, for his part, said that the government would continue with its “fiscal discipline." “We are optimistic of meeting our fiscal goals and aligning our fiscal performance with our rating peers out given our efforts to control government spending and use public resources in the most efficient manner," Abad said. As of end-September, the government's budget deficit stood at P259.8 billion as against to the P325-billion deficit ceiling for the entire year. Together with the other government agencies, the Bangko Sentral ng Pilipinas (BSP) will continue pursuing sound macroeconomic management and structural reforms that would create an environment that would support higher levels of economic growth for the Philippines, BSP Gov. Amando Tetangco Jr. said. — JE/OMG, GMANews.TV