UBS: PH economy may be considered investment grade
Swiss banking giant UBS believes that the Philippines should treat itself as an economy with an investment grade rating as it attains decent growth this year, despite a challenging global economic environment.
Paul Donovan, London-based economist at UBS, said in a briefing in Manila last week that investment spending and government pump-priming would allow the Philippines to post a “reasonable” economic growth of 3.3 percent this year, and should pick up to 4.5-4.7 percent by next year.
“Exports are moving positively, but not strongly this year in terms of growth. What we’ve got is investment spending playing actually a pretty large role domestically, and government, which is going from being a negative (factor) last year to being a positive this year,” Donovan said.
On the Philippines’ quest for an investment grade rating, Donovan said there had been recognition in the global financial markets on the progress made in fiscal management and economic development.
“We’re moving in the right direction,” Donovan said, adding however that he’s reluctant to predict changes in credit ratings, citing recent “random” decisions made by credit rating agencies that had been viewed by financial markets with skepticism.
“Why on earth is the Netherlands better rated than France?” he asked.
“I think the Philippines should consider itself an investment grade country. Whether it’s validated by the credit rating agencies is another matter,” he explained, adding that despite recent criticisms on global rating agencies, the Philippines would still benefit from a larger pool of investors if the sovereign attains an investment grade rating.
The Philippine government is currently rated a notch below investment grade by Fitch and two notches below investment grade by Moody’s and Standard & Poor’s.
S&P’s rating outlook is “positive,” suggesting a potential rating upgrade in the next 12 to 24 months.
