The Bangko Sentral ng Pilipinas said it believed another credit-rating upgrade for the country was likely in the second half.
There is merit to projections of an improvement in the country’s credit scores before the year ends, the BSP said, given the favorable developments in the economic environment.
“We share that thought (that an upgrade is probable before the year ends) especially with the beautiful convergence of high economic growth and stable inflation,” BSP Deputy Governor Diwa Guinigundo said.
The Philippines is rated a notch below investment grade by Fitch Ratings and two notches below by Moody’s Investors Service and Standard & Poor’s.
In a paper on the Philippines issued last week, international financial services firm Barclays said it expected either Moody’s or S&P to upgrade the ratings on the Philippines before the year ends. Both Moody’s and S&P have a “positive” outlook on their ratings for the country. Such an outlook indicated the probability of an upgrade should the country sustain current favorable macroeconomic trends.
The last time the Philippines got credit-rating upgrades was in June last year when Moody’s lifted its rating from three to two notches below investment grade and Fitch raised its rating from two to one notch.
Still, the Philippines is pitching for even better credit ratings. Economic officials claimed that the country’s economic fundamentals were about the same as those countries that already enjoyed investment grade.
Guinigundo said there were actually factors that could dampen credit-rating prospects of emerging economies like the Philippines. These included the potential deterioration of the global economy and worsening volatility in the financial markets, both of which could happen should the debt crisis in the eurozone worsen.
Nonetheless, he said that in the case of the Philippines, there were factors that could offset the negative impact of unfavorable developments abroad.
“Our counterweight, which could hopefully outweigh these negative shocks, consist of a robust real sector, stable prices, healthy external payments position, strong banking system, and promising public finance,” the central bank official said.
The Philippine economy, measured in terms of gross domestic product, grew 6.4 percent in the first quarter from a year ago, beating most expectations. This was the second-fastest growth rate in Asia during the period after China’s 8.1 percent.
Inflation, the rate of increase in consumer prices, averaged 3 percent in the first five months of the year. This was the low end of the full-year inflation target of 3-5 percent.
The country has about $76 billion in foreign exchange reserves, which the BSP said was enough to pay for 11.4 months’ worth of imports and was 6.6 times the country’s foreign debts maturing within a year. The BSP said the reserves indicated the country’s ability to settle its obligations to foreign creditors.
The Philippine banking sector remained profitable, the central bank added, showing resiliency amid the financial crisis in the West.
Data from the central bank showed that the combined net income of universal and commercial banks in the country amounted to P30.45 billion in the first quarter, up 41 percent from P21.66 billion in the same period last year.