International credit watchdog Standard & Poor’s described the Philippines as the first “sovereign rising star” of 2013 for becoming the first country to convince investors that it is a safe haven for investments.
In a report titled “The Philippines is the First Sovereign Rising Star of 2013,” S&P said the country was the first this year to emerge from a “speculative grade” to “investment grade” when its credit rating was lifted by a notch from BB+ to BBB- on May 2.
According to S&P, a “rising star” is a bond issuer whose credit has been upgraded to investment grade. Investment grades range from the highest rating of AAA to BBB-, while speculative grades go from BB+ to the lowest rating of D.
Apart from the Philippines, there are 13 other bond issuers whose credit has been upgraded this year to investment grade for the first time. But all 13 are corporate entities.
“The upgrade reflects the Philippines’ strengthening external profile, the moderating inflation, and the government’s declining reliance on foreign-currency debt,” S&P said in the report obtained by the Inquirer.
The Philippines came out with an investment grade ahead of Barbados, Croatia, Indonesia, Romania and Turkey—all of which have ratings of BB+, or just a notch below the minimum investment grade.
Also, the Philippines outperformed 52 others countries with speculative grades lower than BB+.
S&P highlighted the country’s “external profile,” boosted by growing foreign exchange inflows—mainly remittances from migrant workers, foreign investments in the business process outsourcing (BPO) sector, and foreign investments in peso-denominated stocks and bonds. The inflows helped the country in building up its gross international reserves (GIR).
The GIR now stands at about $84 billion, and is enough to cover about a year’s worth of the country’s import requirements. The amount also exceeds the total outstanding foreign debt of private and government entities amounting to about $60 billion.
S&P said the country’s substantial foreign exchange liquidity would enable it to service debts to foreign creditors and bond holders.
Apart from the Philippine government, state-owned Development Bank of the Philippines (DBP) was also named one of the 14 rising stars of 2013.
The day after it raised the Philippine government’s credit rating, S&P did the same for DBP, citing the bank’s healthy financial standing. DBP’s rating was raised from BB+ to BBB.
“DBP is integrally linked to the government and plays an important role in supporting the country’s economic and social development,” S&P said.