Prop-up external accounts to keep credit upgrade – BSP

By Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said in ensuring sovereign credit rating upgrades, the Philippines needs to shore up external accounts and pay closer attention to shortfalls as well as keep inflation within the target.

Diwa C. Guinigundo BSP Deputy Governor Diwa C. Guinigundo

“The biggest challenge to us is to pursue sustainability: Sustainability of policy and institutional reforms, growth and public finance,” Guinigundo commented after debt watcher S&P Global upgraded the country’s credit rating from “BBB” to “BBB+” with a “stable” outlook.

“We also need to address the current account shortfall due to large merchandise trade deficit and ensure that inflation returns to the target range of two-four percent,” he said.

“With splendid record, I am sure we can do it,” Guinigundo added.

The BSP official also said that the economy has remained strong and has sustained strong performance “capped by impressive policy and structural reforms that would ensure its positive long-term prospects. With such an upgrade, this would bring more interest among foreign investors to participate in the growth process and in the end further establish and strengthen the upward trajectory of the Philippine economy.”

S&P’s latest upgrade has brought the Philippine credit rating closer to the “A” territory rating, or just a notch away.

According to S&P, the Philippines has above-average economic growth, a healthy external position, and sustainable public finance.

The stable outlook on the rating, “reflects our view that the Philippine economy will maintain its momentum over the medium term, in combination with contained fiscal deficits and stable public indebtedness,” it said.

Meanwhile, the Philippines’ Investor’s Relations Office said that the positive credit rating action by S&P is “a vote of confidence” and affirmed the country’s creditworthiness.

The upgrade from S&P follows sustained robust economic growth — which has consistently settled above the 6.0-percent mark for the last 15 quarters despite global economic challenges. It comes after the continued exercise of fiscal discipline as the government invests more in much needed infrastructure and human capital development.

The upgrade recognizes implementation of vital policy and infrastructure reforms seen to fuel robust, sustainable, and more inclusive economic growth for the Philippines.

Major reforms include laws on tax reform, liberalization of the rice sector, and strengthening of the Bangko Sentral ng Pilipinas’ charter, as well as initiatives to increase the ease of doing business and relax the foreign investment negative list.