Debt watcher Standards and Poor’s Ratings Services (S&P) has kept the Philippines’ credit rating a notch above investment grade with a “stable” outlook amid expectations that the country’s fiscal and monetary conditions would continuously improve even after a change in administration by midyear.
The lack of infrastructure, however, was seen by S&P as a major deterrent to the Philippines reaching lower middle-income status next year.
S&P said Thursday night that it affirmed the long-term credit rating of “BBB” to “reflect our assessment of the country’s strong external position, which features rising foreign exchange reserves and low and declining external debt” expected to be sustained over the next 18 months.
Credit ratings are a measure of a government’s credit-worthiness. As the stability of state finances is also related to a country’s performance, credit scores serve as a proxy grade for the economy.
Also, improved ratings would allow the government to demand lower rates when it borrows from lenders, which could translate to lower interest rates for consumers and businesses borrowing from banks using government-issued debt paper as benchmarks for their loans.
“Our affirmation of the ratings is premised on the new administration after the May 2016 elections having a strong mandate to continue to pursue orthodox fiscal, economic and development policies,” S&P said.
Among the country’s prevailing strengths included its diversified economy, economic development and fiscal plans favorable to inflation as well as strong external metrics, according to S&P.