The Philippines is expected to secure an investment grade from three major rating agencies ahead of Indonesia, British multinational bank Barclays said.
The Philippines recently bagged its first such rating from Fitch.
In a research note dated April 3, Barclays said the Philippine government’s debt situation continued to improve, driven by fiscal consolidation and strong real growth.
It projected that the country would receive its second investment grade in the next six months.
“We believe that the Philippines will be rated investment grade by all three major rating agencies before Indonesia, as political concerns and external vulnerability are likely to remain a key ratings constraint for the latter in the coming 18 months,” Barclays said.
Barclays also said that the foreign exchange market would continue to favor the peso, citing the country’s solid balance of payments position, positive ratings trend and the government’s reforms.
However, it sees only a “moderate” peso appreciation to 39 against the US dollar in 12 months as the BSP is expected to initiate measures to manage capital flows.
Last Friday, the peso stood at 41.27 against the dollar.
“We also believe that [special deposit account] rate cuts have given the [Bangko Sentral ng Pilipinas] more leeway to manage Philippine peso appreciation. We believe further cuts of 50-100 basis points to SDA rates are likely in the coming six months,” the research note said.
On sovereign ratings, the Philippines is currently rated at a notch below investment grade by both Standard & Poor’s (BB+) and Moody’s Investor Service (Ba1). Fitch was the first to issue an investment grade rating (BBB-) even without a “positive” outlook.
Indonesia, on the other hand, already secured an investment grade rating from Moody’s (Baa3) and Fitch (BBB-). Like the Philippines, Indonesia is rated a notch below investment grade (BB+) by S&P.