ASEAN KEY DESTINATIONS
Philippines credit rating to remain poor
In its report titled "Global Aging 2010: Philippines," S&P drew up a number of scenarios with their corresponding implications for the country's credit rating.
"We project that the Philippines' favorable demographic profile in conjunction with expected fiscal consolidation under our base-case scenario will continue to reduce net general government debt. Our analysis suggests that with fiscal policy reforms, net debt could fall to 11 percent of GDP by 2050 in the Philippines, considerably lower than the sample median of 245 percent of GDP," Agost Benard, S&P credit analyst, said.
An indicator of economic performance, GDP or gross domestic product is the amount of final goods and services produced in the country.
While "such macroeconomic and fiscal trends would imply an improvement to the current 'BB' long-term foreign currency sovereign rating on the Philippines," Benard however said that "in the very long term, prolonged fiscal imbalances and wealth [as measured by GDP per capita] tend to become the dominant factors."
"Using this approach, our 'BB' rating on the Philippines would likely improve in the next decade," he said.
"By 2020, we expect that the Philippines' fiscal indicators will have strengthened such that they would be more in line with sovereigns currently rated in the investment-grade category ('AAA' to 'BBB-') because of the complementary effects of fiscal reforms, stronger growth, and the negligible impact of aging-related expenditures on fiscal balances," he added.
On November 13, S&P raised its credit rating on the Philippines by a notch from "BB-" to "BB." Despite the upgrade, the country's credit score remains in junk territory, as investment-grade ratings range from "AAA" to "BBB-."
A rating of "AAA" has the highest quality with minimal risk, while the "BBB-" carries moderate risk, with adequate capacity for timely payments.
In making the upgrade, S&P cited the country's ample dollar buffer and improving economic prospects, coupled with the orderly conduct of last May's national elections.
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