Malaysian debt watcher upgrades Philippines' credit rating

MANILA, Philippines – The Philippines has secured a credit rating upgrade from a Malaysian debt watcher, which applauded the country's fast economic growth, increasing foreign investments and economic reforms.

In a statement on Thursday, the Bangko Sentral ng Pilipinas (BSP) said Malaysia-based RAM Ratings Services Berhad (RAM) raised the Philippines' global rating to “gBBB2(pi),” or BBB equivalent for major credit raters, a notch above the minimum investment grade.

It also raised the Philippines’ regional and Malaysia national ratings to AA3, three notches away from the highest rating of Triple A.

A credit rating gauges a country's capacity to service its debts. The higher the rating, the better placed a country is believed to meet its obligations on time, allowing it to secure lower interest rates on its obligations.

Major global credit raters Fitch Ratings, S&P Global Ratings, and Moody's Investors Service all put the Philippines under investment grade bracket, suggesting it has more than enough capability to service its debts, making it appealing to investors to lend money.

In the case of RAM, an upgrade may bode well on the Malaysian investor perception of the Philippines.

In upgrading the country, RAM cited the Philippines' strong economic growth as reason for the upgrade. This is despite growth slowing down to 6 percent in the second quarter, the slowest in three years.

BSP said RAM is confident strong growth will be sustained, especially since the ambitious P8.44-trillion "Build, Build, Build" infrastructure agenda is gaining traction.

"The government’s ambitious infrastructure program is broadly on track,” the central bank quoted RAM as saying.

Increasing foreign direct investments (FDI) were also cited. As of May, BSP data show net FDI inflows rose 49 percent to $4.8 billion.

Recent legislative reforms were also applauded, including the passage of the first tax reform law, the Ease of Doing Business Act, as well as the National ID system.

Finance Secretary Carlos Dominguez welcomed the latest credit rating upgrade.

"(This) keeps the Philippines on a positive credit rating momentum, solidifying our key message to investors and other international stakeholders that (the) reform-oriented leadership under the Duterte administration boosts economic competitiveness...," Dominguez said.

BSP Governor Nestor Espenilla Jr. also said the positive credit rating action is an "acknowledgment of sound governance on both the financial and monetary fronts."