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Sunday, January 24, 2016

Philippines secures another credit-rating upgrade

The credit image of the Philippines got another boost after NICE Investors Service cited its governance reforms and intensified campaign for infrastructure development.

NICE upgraded the country’s credit rating by a notch from the minimum investment grade of BBB- to BBB. The move has tightly secured the Philippines’ place within the investment-grade territory.

In a statement released Friday, NICE, which is based in South Korea, said the upgrade was anchored on “improved government transparency as well as enhanced environment backed by expanded infrastructure and social overhead capitals in the form of public-private partnerships.”

The upgrade came amid sustained rise in infrastructure investments, with the state budget for infrastructure rising to 5 percent of GDP this year from 1.8 percent in 2010.

Also, infrastructure contracts amounting to $4.8 billion have been awarded to private-sector investors since 2010 under the Public Private Partnership (PPP) program, making the Philippines one of the most active infrastructure markets in the ASEAN.

The Philippines’ new credit rating with NICE is assigned a “stable” outlook, indicating it may stay the same at least over the short term despite challenges posed by external developments.

Compared with peers, NICE said, the Philippines is seen to be more resilient to shocks, including the impact of a slowing Chinese economy and market volatility arising from higher interest rates in the United

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

The credit watchdog expects the Philippines to sustain a robust economic growth of 6.3 percent over the short and medium term.

Meantime, economic officials welcomed the latest credit-rating upgrade, which marks the 24th positive rating action for the Philippines under the Aquino administration (9 outlook changes to “positive” and 15 actual hikes in credit ratings from various agencies).

“The string of favorable actions from credit rating agencies, the latest of which is from NICE Investors Service, 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,” BSP Governor Amando M. Tetangco, Jr. said.

Finance Secretary Cesar V. Purisima remarked, “Virtuous cycles result from dogged discipline, even when political headwinds seem too strong. 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.

Purisima also noted that with this latest credit rating action from NICE, Fitch Ratings remains the only agency that assigns the minimum investment grade to the Philippines. The others assign higher ratings.

Investor Relations Office (IRO) Executive Director Editha L. Martin said upgrades in credit ratings have provided concrete benefits for the economy, including improved business confidence and reduced borrowing cost for the government. The latter has contributed to lower commercial lending rates for consumers and businesses as well, thus fueling 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,” Martin said.

- Interaksyon

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