PH credit rating may be upgraded
to ‘A’ within 18 months, if…

By Joann Villanueva

A ranking Bangko Sentral ng Pilipinas (BSP) official said Monday, July 1, that an upgrade of the Philippines’ credit rating to “A” level within the next 18 months is a real possibility if economic managers do their part.

In a briefing after the 2019 pre-SONA economic and infrastructure forum at the Philippine International Convention Center (PICC), BSP Deputy Governor Diwa Guinigundo said he is optimistic for an upgrade from the Japan Credit Rating Agency Ltd. (JCRA) since the debt rater already has a ‘BBB’ rating with positive outlook on the country.

“So for the perspective of the JCRA within the next 18 months there could be an upgrade,” he said.

The Philippines has been enjoying investment grade ratings from the three major credit rating agencies – S&P Global, Moody’s Investors Service, and Fitch Ratings – since 2013 because of continued robust growth and strong external position.

Last April, S&P Global Ratings upgraded its investment rating on the Philippines to ‘BBB+’, a notch away from A rating, with Stable outlook due to sustained expansion of the domestic economy, heathy external position and sustainable public finances.

The upgrade was made about a year after the debt rater changed its ratings outlook on the country’s then ‘BBB’ rating from Stable to Positive.

Guinigundo said a working group has been organized and this will be co-chaired by the central bank and the Department of Finance-Bureau of the Treasury (BTr).

He said achieving an A level credit rating needs collaboration among the various government agencies “so that we can address all the outstanding issues raised by the different credit rating agencies.”

He dubbed as very empirical the question on when the country can possibly get an A level credit, citing that “the latest upgrade that we received was from Standard and Poor’s”.

“What we want is, for the next 18 months, that we’re able to address all the issues raised, including per capita income, the current account, including those issues pertaining to secrecy of bank deposits. Once these are addressed probably, we can expect some kind of an upgrade in the next 18 months,” he said.

Guinigundo also pointed out that when the Philippine government issued Panda bond this year market players gave the debt issuance 32 basis points higher than the benchmark rates.

“A bond that is given a 32 basis points above the benchmark is actually triple A. So as far as China is concerned the Philippines enjoys triple A credit rating,” he added.

Panda bond is a debt paper issued by a non-Chinese issuer in China.

The Philippine government issued its second three-year renminbi-denominated Panda bond amounting to PHP19 billion or CNY 2.5 billion, with a coupon rate of 3.58 percent.

The issuance is part of the government’s diversification of securities investments. (First published by PNA, July 1, 2019)