S&P raises Philippine credit outlook

MANILA, Philippines — S&P Global Ratings has raised its credit outlook for the Philippines to positive from stable, raising the possibility of a rating upgrade for the country on the back of solid economic growth, healthy external position, and improvements in policy-making.

“The positive outlook reflects our view that improvements to the Philippines’ policymaking settings could support a track record of more sustainable public finances and balanced growth over the next 24 months,” S&P said in a report late Thursday.

Finance Secretary Carlos Dominguez said the revised outlook is an affirmation of the effectivity of the Duterte administration’s economic agenda.

“It’s a result of good teamwork within the administration and with the legislature, for the benefit of the entire nation,” Dominguez said.

“Favorable credit rating actions are a welcome pat on the back,” Bangko Sentral ng Pilipinas Gover-nor Nestor Espenilla Jr. said.

Espenilla said the BSP is committed to its price and financial stability mandates to provide an environment conducive for economic growth and stability over the years.

“At the same time, the BSP is keen on helping push the economy toward the next stage of development through financial sector reforms, which are vital for accelerating growth and making it more inclusive,” Espenilla said.

A higher credit rating translates to more foreign investments, lower borrowing cost for both the government and private sectors, among others.

S&P added the ratings on the Philippines balance the debt watcher’s assessment of the country’s strong external position and limited general government indebtedness against its lower-middle income economy and pressing infrastructure needs.

The debt watcher pointed out the government is enacting increasingly effective fiscal policies, marked by improvements to the quality of expenditures, still-limited fiscal deficits, and low levels of general government indebtedness.

“At the same time, the economy continues to achieve consistently robust growth,” it said.

Economic managers expect a seven to eight percent gross domestic product (GDP) growth for the Philippines this year from 6.7 percent last year.

The rating agency also cited the passage of the first package of the Comprehensive Tax

Reform Program (CTRP) under Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law to ensure that finances remain sustainable, while addressing the nation’s pressing infrastructure needs and chronic underinvestment.

“CTRP is partially intended to fund the administration’s Build Build Build program, through which the government plans to significantly boost infrastructure spending,” S&P said.

The government targets spending of more than seven percent of GDP annually by the end of President Duterte’s term in 2022.

The debt watcher also cited the role of the Bangko Sentral ng Pilipinas (BSP) in sustaining the economic growth momentum.

“We regard the BSP’s ability to support sustainable economic growth while attenuating economic or financial shocks to be broadly neutral to our ratings. This reflects the central bank’s sound record in keeping inflation low and its history of independence,” it said.

S&P added the central bank’s new monetary policy measures would improve the effectiveness of monetary policy transmission.

The BSP has maintained an accomodative policy stance over the last three years to support the country’s growing economy through a low interest rate regime. It last raised interest rates by 25 basis points in September 2014.