The strong economic growth in the first quarter and sustained reforms by the Aquino administration are bringing the country closer to an investment-grade sovereign rating,
the research units of two foreign banks said.
“We believe the Philippines’ sovereign credit rating is firmly on a positive trajectory, given recent developments on ‘sin’ taxes, public-private partnerships, as well as increasing interest from foreign direct investors,” said Barclays Capital Ltd. economist Prakriti Sofat.
“We expect at least one rating agency to upgrade the Philippines in three to six months, catching up with Fitch. Moody’s currently rates the Philippines Ba2 Positive, S&P rates the sovereign BB Positive and Fitch rates it BB+ Stable. In addition, we now believe Fitch is likely to change the outlook to Positive in the coming three to six months,” Sofat said.
Moody’s trigger for upgrade includes structural improvements in revenue mobilization, continued reductions in the government debt burden, an acceleration of investment spending that places the economy on a path of stronger growth.
Meanwhile, S&P looks on material progress in achieving a sustainable structural revenue improvement or further strengthening of the public balance sheet, yielding reduced fiscal vulnerability.
ANZ Research, a unit of Australia and New Zealand Banking Group Ltd., said improved monetary and fiscal policy credibility as well as better governance and political stability would helpshield the Philippines from rising global uncertainties.
“As a consequence, these will limit the potential damage to the investment cycle and overall economic prospectsfrom a narrow (merchandise) export sector or a structurally low government revenue base (as a percentage of gross domestic product),” ANZ said in its report Asia Pacific Economics Philippines Update.