Rating agencies should upgrade RP – economist

Credit rating agencies have underrated the Philippines and should come around with an upgrade despite the political noise and the looming global slowdown that would stem from the recession in the US.

Standard Chartered Bank regional economist Nicolas Kwan said in an economic briefing that the problems in the US could impact the region as a whole by slowing down the growth momentum by one to three percentage points.

“But we don’t expect anyone to be in recession or even go through a downturn,” said Kwan, who is head of Standard Chartered’s Hong Kong-based research department for Asia.

“The key here is how you would manage your fiscal and monetary policy,” he said. “The Philippines is in a very good position because you have allowed the peso to appreciate so much, now it takes less of inflationary pressure.”

According to Kwan, the Philippines had long been portrayed and stereotyped as a “basketcase” that credit rating agencies have missed a lot of structural changes that should be given more weight than they are getting.

“The Philippines had gone through so much rough time that I think it deserves more credit,” he said. “I think the country is grossly underrated.”

Kwan said that even the ongoing political noise involving allegations of graft and corruption should not be a major concern in the face of improving macroeconomics.

“There are similar political uncertainties in countries like Taiwan and Thailand that are not really causing much concern,” he said. “It’s the same here.”

Kwan said the market would only start getting seriously worried if the political uncertainties would start affecting economic and especially monetary policies.

Over the policy horizon, Kwan said it was good that the Bangko Sentral ng Pilipinas (BSP) has started to cut its interest rates early on so the tension or the stress on the real sector has already declined.

The BSP last cut its policy rate by a only 25-basis point amid speculation of a bolder 50-point cut following the 175-point cut in US policy rates, saying that while there were indications of demand-side pressures building up, indicators showed manageable price pressures.

Aside from the easing of monetary policy, Kwan said there have been significant structural developments that should create a more positive ratings environment for the Philippines.

“All in all, we have much better housekeeping, we have done a lot more structural improvements through the years, that would take us to better outcome even if things will slow,” Kwan said.

According to Kwan, these were factors that credit rating agencies should reconsider, especially after the experience of 1997 when three countries in the region ended up under the programs of the International Monetary Fund (IMF).