S&P keeps PH credit rating a notch below ‘A’

Debt watcher S&P Global Ratings has retained its “BBB+” credit rating for the Philippines, but moving up to the coveted “A” grade may take some time amid the COVID-19 pandemic.

In a statement Friday night, the government’s Investor Relations Office (IRO) attributed the affirmed investment grade rating to S&P’s expectations that the economy would continue to achieve above-average growth over the medium term, which “will drive constructive development outcomes and underpin broader credit metrics.”

With the COVID-19 crisis, S&P projected the Philippines’ gross domestic product to shrink by 0.2 percent this year, before recovering next year with a 9-percent growth.

Since S&P also kept its “stable” outlook, it meant that there would be no credit rating upgrade during the near term, which would have resulted in further lower borrowing costs had it materialized at a time when the government needed to borrow more money to finance COVID-19 response.

“The affirmation of the ‘BBB+’ rating with ‘stable’ outlook is an unequivocal recognition by S&P of the resilience of the Philippine economy to regain its high-growth trajectory in the new normal. President Duterte’s prudent approach to fiscal management coupled with the implementation of bold economic reforms since he took over in 2016 have kept the country’s financial position strong and steady ahead of this coronavirus pandemic that has wracked the global economy,” Finance Secretary Carlos G. Dominguez III was quoted by the IRO as saying.

“We are confident that our government’s four-pillar strategy to deal with the pandemic will see us through this global health emergency as we remain focused on saving lives and protecting communities while gradually lifting mobility restrictions to restart the economy and get people back to work,” Dominguez added.

Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said critical institutional reforms and sound policy management placed the country in the advantageous position of having monetary space to carry out further easing, if necessary.

“While being mindful of our price and financial stability mandates, we are thinking outside the box to enact policies that ultimately help safeguard the lives and livelihoods of our people. Such is our solemn responsibility in this once-in-a-lifetime crisis, and I am confident that our approach will demonstrate the resilience of our country,” he added.

“No country has been spared from the economic effects of this global pandemic, but our strong economic fundamentals and inclusive recovery measures will power our return to growth. Thanks to our ample buffers and fiscal space, we can jumpstart domestic demand by investing more in healthcare, infrastructure, and the entire food value chain,” said Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua.—Ben O. de Vera INQ