By LEE C. CHIPONGIAN
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno reiterated his confidence yesterday that the country will acquire its first “A” credit rating within two years, if not sooner.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)
“I believe that we are moving towards the right direction towards our goal of receiving an ‘A’ rating, which is seen to have a vast positive impact on the local economy,” said Diokno.
Currently, the Philippines enjoys an investment grade “BBB” credit rating and a single “A” is just one notch away. An “A” credit rating means lower borrowing costs for the country and a “favorable investment environment which support economic growth.”
The Philippines’ credit ratings were upgraded to investment grade in 2013. It has “BBB/Stable” ratings from Fitch Ratings, “Baa2/Stable” from Moody’s Investor Service, and a “BBB+/Stable” from Standard & Poor’s.
For Fitch Ratings, the country’s rating is one score above the minimum investment grade and its outlook revision signals a potential upgrade to “BBB+” within the next 12 to 18 months. For S&P Global, it is just one more upgrade to get to “A”.
Diokno, commenting on the recent move by Fitch Ratings to raise its outlook to “positive” from “stable”, again said that the “Road to A” program will proceed faster if Congress will move with haste to work on key measures such as: the Corporate Income Tax and Incentives Rationalization Act and Passive Income and Financial Intermediary Tax; amendments to the Anti-Money Laundering Act of 2001 and the Human Security Act of 2007; amendments to the Agri-Agra laws; and reforms in financial consumer protection and deposit secrecy.
“The urgent passage of structural reforms is critical to the strategy of achieving an A-level credit rating within the next two years as this enhances the country’s institutional strength to manage the economy, which is a key indicator looked into by credit rating agencies,” said Diokno.
Fitch Ratings raised the outlook on its “BBB” investment grade credit rating for the Philippines from “stable” to “positive” less than a week after Japan-based Rating and Investments Information Inc. upgraded the country’s rating from “BBB” to “BBB+”.
On Tuesday, when Fitch Ratings released its new “positive” outlook, Diokno said: “We deserve a credit rating upgrade from Fitch, and the ‘positive’ outlook should soon lead us there. As part of our Road to ‘A’ agenda, we are more vigorously communicating the economic milestones as well as the governance and institutional strengthening the Philippines achieved in recent years. At the same time, we are meticulously tracking how the economy is progressing in terms of achieving a wide array of metrics that will solidify our position as an ‘A’ rated economy in two years.”
“An ‘A’ scale rating is not an end itself, with the overarching objective being maintaining macroeconomic stability and making growth truly inclusive,” he added. “Having said that, a rating within the ‘A’ territory will place the Philippines in the radar of more investors, which bodes well for attracting more job-generating investments.”
Fitch Ratings said its “outlook revision reflects (its) expectations of continued adherence to a sound macroeconomic policy framework that will support high growth rates with moderate inflation, progress on fiscal reforms that should keep government debt within manageable levels and continued resilience in its external finances.”
Fitch Ratings’ “BBB” rating with a “positive” outlook compares with the “BBB” rating with a “stable” outlook from Moody’s Investors Service and Korea-based NICE Investors Service.