Creditworthiness crucial in times of crisis: BSP

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Benjamin Diokno, Bangko Sentral ng Pilipinas (BSP) governor, yesterday said the affirmation by international credit rating agencies of the Philippines’ investment grade credit ratings will help the country to continue accessing funding at favorable rates amid the coronavirus disease (COVID-19) pandemic.

“The country’s creditworthiness plays a crucial role, more so in times of crisis,” Diokno said.
Credit rating agency Standard & Poor’s Global last week maintained its BBB+ long-term credit rating with a stable outlook on the Philippines “in recognition of the country’s sound macroeconomic fundamentals going into the COVID-19 pandemic and its perceived ability to bounce back from the crisis.”

BBB+ is a notch away from the minimum score within the “A” territory.

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Moody’s Investors Service early last month also maintained its Baa2 rating with stable outlook on the Philippines, even after seeing a contraction of as much as 2 percent in the country’s gross domestic product (GDP) growth for this year.

Fitch Rating also affirmed the Philippines’ rating at BBB last month but changed the outlook to stable from positive as the world continues to grapple with the COVID-19 pandemic.

Fitch said the affirmation of the BBB rating “reflects the Philippines’ fiscal and external buffers, including its low debt-to-GDP ratio compared to peer medians and net external creditor position, as well as its still-strong medium term growth prospects.”

“While the Road to A may have temporarily taken a back seat given that our focus now is on saving lives, jobs, and livelihoods, favorable credit rating assessments of the Philippines are much welcome,” Diokno said.

Diokno cited the recent successful global bond issuance by the national government in April as proof that the international financial community considers the Philippines a highly attractive debt issuer, even as the pandemic wreaks havoc on performance of economies worldwide.

In the said global bond issuance, the government raised $2.35 billion, with the 10-year tenor being priced at 180 basis points (bps) over US Treasuries, better than the initial pricing guidance of 220 bps; and the 25-year debt paper being priced at 2.95 percent, tighter than the initial pricing guidance of 3.375 percent.

Diokno said these are the lowest rates for the 10- and 25-year tenors in the country’s history.

“Our creditworthiness has also allowed us to easily access other forms of financing, such as those from the domestic capital market and concessional loans from bilateral and multilateral sources,” he said.

Diokno stressed the Philippines may continue to enjoy easy access to funding even as the world is still trying to cope with the crisis, especially with the country’s investment grade credit ratings having been affirmed by various credit rating agencies.

The confirmation of the Philippines’ investment-grade credit ratings by the credit rating agencies came amid a wave of rating downgrades and negative outlook revisions across the globe.

From January to May this year, the three major international debt watchers Fitch, S&P and Moody’s Investors Service have implemented a total of 37 sovereign credit rating downgrades and 84 negative outlook revisions.

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