Rising debt, weak economy pose risk to PH credit ratings, says ING

Expectations of easing inflation lowered interest rates across the board and allowed the Bureau of the Treasury to raise P35 billion from short-dated T-bills on Monday.

The continued rise in public debt, however, has raised concerns about its possible impact on the country’s credit ratings. An international bank, for instance, warned of a possible credit-rating downgrade as the share of public debt to gross domestic product (GDP) as of end-March ended slightly higher that the manageable threshold of 60 percent.

On Monday, the Treasury fully awarded P5 billion in benchmark 91-day debt paper at an average yield of 1.27 percent, down from 1.278 percent last week.

It also sold P8 billion in 182-day IOUs at 1.54 percent, down from 1.549 percent previously.

The P12 billion in 364-day treasury bills offered fetched an annual rate of 1.81 percent, down from 1.829 percent.

Across the three tenors, tenders amounted to P83.7 billion, making the auction over three times oversubscribed.

National Treasurer Rosalia de Leon noted strong investor participation as rates marginally declined.

De Leon said the Treasury opened its tap facility window to sell another P5 billion in one-year T-bills to the 11 government securities eligible dealers-market makers.

While the government continued to borrow to finance the fight against the COVID-19 pandemic, ING senior Philippine economist Nicholas Mapa warned that the end-March debt-to-GDP ratio of 60.4 percent was “a troubling development and it gives one more reason for the ‘big three’ [debt watchers] to take a hard look at the country’s ‘precious’ credit rating.”Mapa was referring to Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings. These ratings agencies cited the country’s low debt ratios and higher-than-peer GDP growth prospects as basis for keeping their sterling credit ratings for the Philippines, Mapa said.

“The rising debt-to-GDP ratio and below-average GDP performance will surely get the attention of the ‘big three’ and leave the Philippines susceptible to a revision of the country’s outlook or even a downright credit-rating downgrade if the ratio stays above 60 percent for an extended period of time,” he said. INQ

Read more...