Philippine panda bonds get AAA rating

MANILA, Philippines — A Chinese credit rating agency has given the Philippines and its planned panda bonds issuance its highest rating of AAA with a stable outlook, citing the country’s strong economic growth and sound macroeconomic fundamentals.

In a report, China Lianhe Credit Rating Co. Ltd. assigned an AAA long-term issuer credit rating to the country and an AAA issue rating to its 1.46-billion renminbi bond issuance.

“Lianhe Ratings assigned AAA long-term issuer credit rating (national scale) to the Philippines and AAA issue rating to Republic of the Philippines 2018 Renminbi Bonds (Series 1); the rating outlook is stable,” it said.

A stable outlook balances positive and negative developments in the Philippines’ credit profile. An AAA rating is the highest given by the Chinese credit watcher, according to the DOF.   

Lianhe Ratings decided on the rating and outlook on the back of the country’s “strong and consistent” economic growth.

“Lianhe Ratings expects the Philippines to have a GDP (gross domestic product) growth of around 6.8 percent in 2018,” the credit rating agency said in its report.

“At the same time, the unemployment rate of the Philippines is expected to remain stable and CPI (Consumer Price Index) growth may stay within the target band (two to four percent) set by the BSP (Bangko Sentral ng Pilipinas),” it added.

It also cited the government’s declining debt-to-GDP ratio; the low level of external debt, which it said is “well-covered by the ample current account revenues and foreign reserves;” and the Philippines’ capacity to pay its obligations amid rising government revenues.

The credit watcher also factored in the improved economic ties between Manila and Beijing, as well as the large remittance inflows that contribute to the country’s ability to earn foreign exchange.

It also noted the “successful implementation” of the Duterte administration’s 10-point socioeconomic agenda, among which is the enactment of  the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which it said would help the Philippines sustain its economic growth in the following years.

As for its planned onshore bond float, Lianhe Ratings said the Philippines’ upcoming panda bond issuance “have the lowest expectation of default risk.”

The rating was assigned based on the Philippines’ application for registration of its 1.46-billion renminbi three-year panda bond issuance, with net proceeds to be remitted outside of China to serve as part of the Philippines’ international reserves.

Following the issuance of the rating, National Treasurer Rosalia De Leon said the Bureau of the Treasury (BTr) would continue to closely monitor conditions in the Chinese debt market.