The Philippines’ global credit rating may be raised to investment grade within a year following five “positive actions” from credit watchers in 2011, according to the central bank.
Diwa Guinigundo, Bangko Sentral ng Pilipinas deputy governor, said Wednesday that in six months to a year, it is possible for the country to attain an upgrade of “a notch or two,” especially after Standard and Poor’s improved its outlook on the country from “stable” to “positive” last month.
For borrowings from foreign lenders, Moody’s Investor Service and S&P rate the country “BB” and “Ba2,” respectively, both indicating two notches below investment grade.
But Fitch Ratings marks the country with “BB+,” which is just a step away from the level where a country’s capacity to pay off its debts is perceived to be “adequate.”
A two-notch upgrade would bring Moody’s and S&P ratings to investment grade, as a one-step uptick will do with Fitch ratings.
“If the direction of the country’s economy stays on course, I think we have sufficient basis to be confident that we shall receive a credit upgrade that we deserve,” Guinigundo said.
He said the domestic economy continued to grow in 2011 despite problems elsewhere in the world that affect the Philippines, such as the fiscal predicaments of the United States and certain countries in the European Union.
He also said that the inflow of funds from abroad remained strong with remittances from overseas-based Filipinos reaching some $16.5 billion in the 10 months to October and gross international reserves hitting $76 billion.
Guinigundo said the Philippines had been accorded “two slots” for a possible upgrade, which a positive outlook—such as that of S&P—makes all the more seemingly attainable.
“Fitch was almost immovable but they moved,” he added. “Whatever improvement from the current (ratings) is welcome, but we deserve investment grade based on our assessment.”
A credit rating upgrade would mean lower borrowing costs for the country, which would translate to easier access to funds for companies and individuals.
Last December when S&P changed its Philippine outlook to positive from stable, company analyst Agost Bernard said the move was meant to reflect the assessment that the Philippines’ external vulnerability had diminished.