Phl confident of credit rating upgrade

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) is confident that the Philippines would soon get a credit rating upgrade from international credit rating agencies led by Standard & Poor’s (S&P) on the back of the country’s strong macroeconomic fundamentals.

BSP Governor Amando Tetangco Jr. said the country would likely get an upgrade in its credit rating as the country’s domestic output is expected to rebound strongly this year.

“We are even more optimistic now that we will get an upgrade sooner than later,” Tetangco said in an interview with reporters after the launching of the Foreign Loan Approval and Registration System (FLAReS).

He cited the expected economic rebound due to improving consumption on the back of higher government spending with the public private partnership (PPP) scheme as well as the improvement in global economic conditions.

“Given one, the acceleration in releases of government funds for infrastructure and the improvement in the global economic conditions particularly in the US,” he said.

According to him, weak global demand resulting in lower exports as well as cautious government spending pulled the country’s gross domestic product (GDP) growth to 3.7 percent last year from 7.6 percent in 2010.

“Now you see a reversal of these two factors. The government has released significant amount of the budget for 2012 and there is an improving economic situation in US which is a major market for Philippine exports,” Tetangco said.

The BSP chief said credit rating agencies as well as other institutions including analysts and the like have been impressed with the reforms that are being implemented by the Philippines.

“The Philippines is in a good spot today. As can be gleaned from major external debt indicators, the BSP has been successful in its debt management efforts,” he said.

He added that key ratios such as gross international reserves to short-term debt, outstanding debt to gross national income and debt service to foreign exchange receipts have consistently strengthened, indicating the country’s sustained and improving ability to meet maturing obligations.

The country’s GIR has hit a new all-time high of $77.7 billion in February, enough to cover nearly 11 times our short-term debt under the original maturity concept, and about seven times using the residual maturity concept.

On the other hand, Tetangco said the country’s external debt to GDP at 27.5 percent has been on a downtrend during the past decade and is now less than half its high over the 10-year period of 68.6 percent in 2003.

Likewise, he pointed out that the maturity of our external debt has been lengthened, with close to 90 percent of our external debt being long-term and the average maturity is now about 22 years.

Tetangco together with Finance Secretary Cesar Purisima met with representatives of S&P Monday evening.

Last December, S&P upgraded the credit rating outlook of the Philippines to positive from stable, signaling a possible upward revision in the country’s credit rating over the next 12 months.

S&P raised the credit rating of the Philippines to two notches below investment grade from three notches last November 2010 on the back of the country’s rising external liquidity.