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NEWS UPDATES Asean Affairs              30  July 2011

Philippines gets no rating upgrade

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The Philippines failed to snag a fresh upgrade from Standard & Poor’s even after Manila’s representations for a lift in its credit rating.

In a statement from Singapore, Standard & Poor’s Ratings Services said it kept its “BB/B” foreign currency and “BB+/B” local currency sovereign credit rating on the Philippines.

S&P kept a stable outlook, which means the current rating may stay for the next six months to a year.

The debt watcher also kept its “axBBB+/axA-2” Asean scale rating, “BB” foreign currency senior unsecured issue rating, “BB+” local currency senior unsecured rating, and “B” short-term local currency debt rating on the Philippines.

S&P also “affirmed its recovery rating of ‘3’ on the Philippines, which denotes our expectation of 50 percent-70percent recovery in the event of a distressed debt exchange or payment default. The transfer and convertibility assessment of ‘BB+’ is unchanged.”

“The rating on the Philippines is constrained by the country’s relatively low income level, weak fiscal profile, and high, albeit improving, public sector debt and interest burden,” said Agost Benard, S&P credit analyst.

“Strong external liquidity, low external liability position, and a record of moderately strong economic growth support the rating. The stable outlook encapsulates our expectation that remittances and BPO receipts will continue to drive current account surpluses, while prevailing government debt and interest burdens and the weak fiscal profile will take time to resolve,” Benard added.

S&P said any further hike in the Philippines’ ratings would depend “on evidence of material progress in achieving a sustainable structural revenue improvement, or further strengthening of the external balance sheet, yielding reduced vulnerability to shocks.” “Conversely, we may lower the ratings if a weakened commitment to fiscal consolidation results in a heavier debt burden, or if the external liquidity position deteriorates significantly, possibly precipitated by unfavorable macroeconomic policies or political instability,” the debt watcher said.

S&P last raised Manila’s credit rating on November 12, 2010. This set off similar hikes by Moody’s and Fitch, placing the Philippines’ debt score a notch below investment grade.

Moody’s raised its credit rating on the Philippines on June 15, upgrading the country’s long-term foreign and local currency ratings to Ba2 from Ba3, with a stable outlook.

This was followed by Fitch, which on June 23 raised Manila’s foreign currency ratings to BB+ from BB, also with a stable outlook.

Philippine officials have been pining for a further hike in the country’s credit rating, citing resilient economic growth, an improving fiscal position, and a widening balance of payments surplus.

The Bangko Sentral ng Pilipinas had said the country was “under-rated” vis-à-vis its peers.


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