MANILA, Philippines - The Philippines is ripe for a credit rating upgrade, according to the latest market research report by First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) Capital Markets Research.
In its Market Call for April, the two institutions said that because of prudent portfolio management and huge dollar reserves, the Philippines may soon get an upgrade.
“We believe that the country is ripe for an upgrade, reason being that the Philippines’ economic fundamentals have remained strong with huge dollar reserves that can enable it to weather adverse external events,” the two institutions said in its latest Market Call report.
The report noted that the country’s dollar reserves are nearly enough to cover 11 months of imports.
According to the latest data from the Bangko Sentral ng Pilipinas (BSP), the country’s gross international reserves rose to $67.8 billion in April, which is roughly $2 million higher than the $66 billion posted in March.
The country’s dollar reserves consist of BSP’s gross foreign currency holdings, gold reserves, special drawing rights from multilateral institutions and foreign investments. It is an indicator of the country’s ability to service the economy’s need for foreign currencies.
The BSP said the April GIR level is enough to cover 10.4 months of imports and goods and payments of services and income and is equivalent to 10.8 times the country’s short-term external debt based on original maturity and 6.1 times based on residual maturity.
FMIC and UA&P said that the country’s economic fundamentals are in “better shape” now that when it previously enjoyed a BB+ rating in 1997.
The Philippines has a rating that is three notches below investment grade by Moody’s and two notches below investment grade by Fitch and S&P.
However, the two institutions noted greater inflation risk ahead.
“While the perception of inflation risk may be greater than our forecast suggests (April inflation forecast is 4.2 percent), we maintain our bullish view on the market,” they said in the Market Call.
In April, inflation in the Philippines reached a 12-month high of 4.5 percent, according to the latest report from the National Statistics Office (NSO).
The Market Call also said that there’s reason to be bullish on the market with investor confidence up.