S&P raises Philippines debt rating again

12 May 2014   Category: News, Asia, Global, Philippines   By Daniel Shane

Standard & Poor’s (S&P) has raised the creditworthiness of the Philippines’ sovereign debt for the second time in little over a year on the back of economic and structural reforms in the Southeast Asian nation.

In a statement, the credit ratings agency said that it had increased the country’s rating one level from BBB- to BBB, with a stable outlook.

The announcement comes just 12 months after S&P upgraded the Philippines to investment grade.

“We raised the ratings because we now believe the ongoing reforms to address shortcomings in structural, administrative, institutional, and governance areas will endure beyond the current administration,” a statement from S&P read. 

“We believe the resulting gains in government revenue generation, spending efficiency, and the improvements in public debt profile and investment environment will at least be preserved in the medium term,” the agency added.

The country, sometimes referred to disparagingly as the “Sick Man of Asia”, posted economic growth of 7.2% last year, while its PSEi stock index has risen by more than 17% in the year-to-date, according to Bloomberg.

S&P highlighted the contribution of remittance flows by overseas Filipinos as a key source of foreign currency, as well as the growth of the country’s call centre industry.

Filipino President Benigno Aquino, whose single term in office will end in 2016, is seeking to spend more than US$11 billion on infrastructure such as airports and roads as he seeks to sustain economic growth in the country.

S&P said that Mr. Aquino’s departure in two years’ time would present uncertainty and that his eventual successor must work on “maintaining impetus and direction”.

During his term, Mr. Aquino has also sought to shore up the Philippines’ finances by improving tax collection and cracking down on government corruption and inefficiency.

S&P highlighted other long-term challenges which could impact the Philippines’ credit rating, including a high rate of unemployment and low per capita income.