S&P Global Ratings has kept its investment grade rating for the Philippines, citing in its review that the country’s economy was recovering well on the back of strong domestic demand.
In a statement on Thursday, the international debt watcher said it affirmed its “BBB+” long-term and “A-2” short-term sovereign credit ratings on the Philippines, as well as a stable long-term outlook for the country.
This means that the Philippines will be able to borrow money for its various programs at current interest rates, if not lower.
“The sovereign credit ratings on the Philippines reflect the country’s above-average economic growth potential, which should drive constructive development outcomes and underpin broader credit metrics,” S&P said.
S&P said it may raise the Philippines’ ratings if its economy recovers much faster than expected and if the government achieves faster fiscal consolidation.
“We may also raise the ratings if institutional settings, which contributed to a significant enhancement in the Philippines’ prepandemic credit metrics over the past decade, further improve,” it added.
On the other hand, S&P said that it may lower its ratings if economic recovery falters, leading to a significant erosion of the country’s long-term trend growth.
It may also consider this if there is associated deterioration of the government’s fiscal and debt positions.
“Indications of downward pressure on the ratings would be a sustained annual change in the net general government debt that is higher than 4 percent of GDP (gross domestic product) and the general government net debt stock exceeding 60 percent of GDP, or interest payments exceeding 15 percent of revenue on a sustained basis,” S&P said, detailing the metrics that would lead to a ratings downgrade.
The credit rating agency added that persistently large current account deficits leading to a structural weakening of the country’s external balance sheet would also mean further downward pressure on the Philippines’ ratings.
S&P said, however, that the Philippines’ economic recovery has been off to a strong start this year, with expectations that the country’s GDP will grow 6.3 percent this year. INQ