Structural, sound policy reforms buoy PHL's credit rating -- Tetangco

Structural, sound policy reforms buoy PHL's credit rating -- TetangcoBy Joann S. Villanueva

MANILA, Sept. 21 (PNA) -- Sustained policy and structural reforms continue to support the Philippines investment grade ratings, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said.

This after Standard and Poor's Global Ratings (S&P) on Wednesday affirmed its 'BBB' rating with 'Stable' outlook on the country's long-term rating. The 'A-2' short-term sovereign rating and 'axA/axA-2' ASEAN regional scale rating were also affirmed.

"The Philippines' ability to keep its credit rating well within the investment grade scale, which has transcended change in political leadership, is a testament that the country's economic gains have been built from deeply rooted structural and sound policy reforms over the years," Tetangco said.

"Through continued conduct of sound monetary policy and prudent bank supervision, as well as efficient management of the country's external accounts, the BSP will help make sure these economic gains are further enhanced moving forward," he added.

S&P, in a statement, said its ratings on the country "reflect our assessment of its lower middle-income economy and rising uncertainties surrounding the stability, predictability and accountability of its new government."

"Offsetting these weaknesses is the Philippines' strong external position, which features rising foreign exchange reserves and low and declining external debt," it said.

The government's budget gap is seen to average at 1 percent of domestic output this year even as the government further strengthens its anti-poverty programs.

The debt rater projects that the government's fiscal defiicit will result to the drop to about 18 percent of gross domestic product (GDP) of the net general government debt burden in 2019 from its peak of 28 percent of GDP in 2010 and this, it said "represents a ratings strength."

With this the credit rater said "the rising pressure on the Philippines' institutional and governance settings has the potential to hamper the ability to develop and implement swift policy responses."

Despite this risk, the credit rating agency believes that the country's external payments position, backed by rising foreign exchange reserves among others, will remain strong.

In August, the country's gross international reserves (GIR) stood at USD85.8 billion, enough to cover over 10 months' worth of payments of goods and serivces.

The country's current account, which has been in surplus for more than a decade now, "is likely to remain in surplus" at an average of two percent of domestic output until 2019, S&P said.

It said that the country's competitive unit labor costs vis-a-vis its peers along with a large young, educated, and flexible labor market "imply further strength in services exports over the next five years."

"Participation in free trade agreements could provide further upside to the Philippines' export earnings," it said.

The country's net external creditor position is seen to remain in place, with net external debt average projected at -16 percent from this year until 2019 and external liquidity position at about 67 percent during the same period.

"We do not envisage a marked deterioration in the Philippines' external financing from a shift in foreign direct investments or portfolio equity investments, or from a reduction in disbursements from donors," it added. (PNA)
BNB/JSV/SGP