MANILA, Philippines—An improving global economy and favorable local developments are increasing the Philippines’ chances of getting an investment grade soon, according to ratings agency Standard and Poor’s.
S & P has issued a new report saying that the Philippines and its neighbors will benefit from improving economic indicators in the United States, the world’s largest economy.
S & P likewise cited developments in China and international efforts to address the crisis in the euro zone and deflation in Japan.
The United States, the euro zone, China and Japan are four of the biggest export markets for many emerging Asian countries, including the Philippines.
“For the Asia Pacific region, which has endured half a decade of leaden skies hanging over the global economy, some rays of sunshine could burst through in 2013!” S&P said in the report titled “Asia Pacific Sovereigns: A Break in the Clouds” released Wednesday.
The credit watchdog also highlighted its perception of favorable political conditions in the Philippines that bode well for the performance of the domestic economy.
“In our view, the current administration, which took office in June 2010, possesses a level of legitimacy, support and stability that reduces political uncertainty and allows for improved legislative efficiency, S&P said.
“This conducive political setting enables the administration to focus on its key policy objectives of fiscal consolidation, increased infrastructure provision and poverty reduction,” it added.
S&P currently assigns the Philippines a rating of BB+, which is just a notch below investment grade.
Representatives of S&P were in Manila from March 11 to 13 to meet with the government’s economic officials and to assess the overall economic picture in the country.
It expects the Philippine economy to grow by 5.9 percent this year, slower than last year’s 6.6 percent but faster than projections for advanced economies.
It sees inflation to average at 3.8 percent this year.
The Philippines was given a “positive” outlook, which means the current rating may be raised to investment grade if the favorable trends continue.
These include improving fiscal condition of the government, robust pace of economic growth, benign inflation, stable banking sector, and rising foreign exchange reserves.
Government officials are pitching for an investment grade, claiming that many of the country’s economic indicators are already comparable to those of countries enjoying investment grade.
They said credit rating firms were actually behind the international capital markets, which price bonds from the Philippines as if the country had already secured investment status.