What Went Before: PH’s credit ratings through the years

MANILA, Philippines—In May last year, the Philippines obtained an investment grade from international credit rating agency Standard & Poor’s, just less than two months after getting its first investment grade from Fitch Ratings.

S&P said that it had raised the country’s credit rating by a notch from BB+ to BBB- —the minimum investment grade—citing the country’s rosy macroeconomic fundamentals amid global economic problems.

It also assigned a stable outlook on the country’s new rating, which means the rating will likely be unchanged over the short term barring unexpected developments that could change the country’s macroeconomic indicators.

A credit rating is used mainly by foreign creditors when deciding to lend money to the government or private corporations.

More broadly, however, an investment grade signals to the investors that a country is a place suitable for business, and that its government and private enterprises have the ability to pay their obligations, resulting in lower borrowing costs.

The Philippines got its first credit rating in the early 1990s. In 1993, it received its first rating, a BB-, from S&P.

Downgrade

In 1995, S&P upgraded the Philippines’ rating to BB and in 1997 to BB+. However, a downgrade to BB-, the country’s worst rating from S&P, came in 2005 with the credit rating firm citing the government’s “inadequate” response to its fiscal problems.

Prior to the upgrade from S&P in May, Fitch was the first to recognize the Philippines’ improved economic standing.

In March, Fitch announced that they upgraded the status of the Philippines from BB+ to BBB-, saying the Philippine economy is resilient and now experiencing a level of foreign currency inflows that is even more comfortable than those of many industrialized nations.

In October, the Philippines obtained its third investment grade rating for the year when Moody’s rated the country “Baa3,” a notch higher than the previous “Ba1.” Moody’s also revised its outlook for the Philippines’ government debt rating to positive, indicating the possibility of another upgrade in the next 12 to 18 months.—Inquirer Research

Sources: Inquirer Archives, gov.ph, senate.gov.ph, pids.gov.ph