The country’s credit rating will likely get an upgrade in the next few months, as rating agency Standard and Poor’s (S&P) raised its outlook yesterday to positive.
A positive outlook indicates a possible upgrade, in our case to an “A—” rating, within 24 months.
A higher rating helps lower borrowing costs and makes the country more attractive to investors. This also allows businesses to borrow at lower rates, helping fund expansion and job creation.
S&P kept the sovereign credit ratings at “BBB+” for the long-term and “A-2” for the short-term.
In a statement, S&P said it raised the outlook due to “the country’s effective policy-making, fiscal reforms, improved infrastructure and policy environment that have helped keep economic growth strong in the past decade.”
They also cited the recent passage of the CREATE MORE and PPP laws as credit positive for the country.
Eli Remolona Jr., Bangko Sentral ng Pilipinas (BSP) governor, said the action “reflects the work the government has done to improve the economic, fiscal, and monetary environment, enabling strong growth to continue.”
“The BSP remains committed to promoting price stability, financial stability, and an efficient payment system to support sustainable economic growth,” Remolona said.
Ralph Recto, finance secretary, emphasized the action “is another powerful endorsement of President Ferdinand Marcos, Jr.’s leadership and the government’s sound economic and fiscal policies.”
“It reaffirms our stable economic and political environment and that we are on track to achieve a growth-enhancing fiscal consolidation. We have a comprehensive Road to A initiative to ensure we secure more upgrades soon,” Recto said.
“The major benefit of having a high credit rating is wider access to cheaper and more cost-effective borrowing costs for the government and the private sector,” Recto added.
In the announcement, S&P expects a 5.5 percent growth for the Philippine economy in 2024. In the third quarter, the gross domestic product expanded by 5.2 percent year-on-year, bringing the average in the first three quarters to 5.8 percent.
S&P noted the country remains one of the fastest-growing economies in Asia—behind Vietnam (7.4 percent) and ahead of Indonesia (4.9 percent), China (4.6 percent), and Singapore (4.1 percent).
S&P said the recently enacted Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, coupled with new reforms introduced such as the Public-Private Partnership (PPP) Code, should support stronger foreign direct investment inflows into the Philippines over the next two to three years.
S&P also noted a recent slowdown in inflation, with prices rising by only 3.4 percent in the first nine months of 2024, down from 6 percent the previous year.
Remolona said the Philippines has ample reserves to protect against global economic fluctuations. As of end-October, the country’s gross international reserves rose to $111.1 billion. This is enough to cover eight months’ worth of imports, well above the three-month benchmark suggested by the International Monetary Fund.
S&P also commended the BSP’s strengthened oversight of the financial sector, contributing to improved stability.
Remolona stressed Philippine banks are well-capitalized and highly liquid, with capital adequacy and liquidity ratios surpassing both BSP regulatory and international standards.
S&P raised the Philippines’ rating to its current level in 2019, BBB- in 2013, and BBB in 2014. The next level is A-, the entry point to A ratings.
Moody’s and Fitch rate the Philippines Baa2 and BBB, which are one level below the S&P rating.
