Japan agency upgrades PH's credit rating to BBB+

Japan credit rating agency raises Philippine rating

THE Philippines has received another credit rating upgrade, which is the highest rating the country has ever achieved.

In a report released Monday, Japan Credit Rating Agency Ltd. (JCR) gave the Philippines BBB+ from BBB rating. This was just a notch away from the minimum score in the "A" category.

The latest upgrade from JCR is the 22nd positive rating action (covering both improvement in outlook and actual credit scores) for the Philippines from major international credit rating agencies since 2010, the Investor Relations Office (IRO) of the Bangko Sentral ng Pilipinas said.

This development places the Philippines' credit rating two places ahead of Indonesia's BBB- and at par with that of India, whose economy is seven times the size of that of the Philippines.

"JCR is of the view that the Philippine economy will, by and large, sustain an annual growth of around 6 percent in the years to come driven by strong domestic demand," the rating agency said.

In the report, JCR highlighted the ability of the Philippines to maintain sound fiscal position, high external liquidity, and solid economic growth.

It also cited general stability in the country's political situation even as potential candidates for national positions gear up for the 2016 elections.

JCR also noted the stable social situation amid inroads in poverty reduction, with the poverty rate falling from 28.6 percent in 2009 to 25.8 percent in the first half of 2014.

The new credit rating is assigned a "stable" outlook, which means adjustment is unlikely in the short term.

Government economic officials welcomed the upgrade, which marked the third positive rating action from JCR over the past five years.

"The latest ratings decision of JCR, which makes the Philippines very close to securing a rating within the 'A' category, appropriately reflects the strength exhibited by the economy. Inflation has remained low, external liquidity ample, and banking system sound. All this has been achieved despite a challenging external environment," BSP Governor Amando Tetangco said.

"The upgrade to BBB+ is a recognition partly of how the country’s fiscal sector has transformed since 2010. Fiscal reforms, both legislative and administrative, have resulted in more buoyant revenue collections, manageable deficits, and lower debt service burden. The pace by which the debt burden has declined over the years is one solid proof of the rare kind of fiscal discipline that the Philippines exercises," Finance Secretary Cesar Purisima said.

IRO, which serves as the government's central point of contact for credit-rating agencies, underscored the need for public vigilance to ensure that the Philippines keeps its hard-earned investment grade sovereign credit ratings beyond 2016.

"The Philippines has achieved unprecedented gains in its credit standing over the past five years. After suffering from stubborn speculative credit ratings not too long ago, the Philippines now enjoys a seal of good housekeeping from all major international credit rating agencies," IRO Executive Director Editha Martin said.

"There should be no turning back. The need to maintain good governance – which boosts confidence of investors, creditors, rating institutions, and the general public – even after a change in leadership in 2016 cannot be overemphasized," Martin said.- (SDR/Sunnex)

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S&P Raises Philippines’ Credit Rating “BB+” to 9-Year High

July 5, 2012: The Philippines' debt rating was raised to the highest level since 2003 by Standard & Poor's, taking President Benigno Aquino nearer his goal of attaining investment grade.

The nation's long-term foreign currency-denominated debt was raised one level to BB+ from BB, S&P said in a statement Wednesday (July 4, 2012). That's one step below investment grade and on a par with neighboring Indonesia. The outlook on the rating is stable.

"The foreign currency rating upgrade reflects our assessment of gradually easing fiscal vulnerability," Agost Benard, a Singapore-based analyst at Standard & Poor's, said in the statement. "The rating action also reflects the country's strengthening external position, with remittances and an expanding service export sector continuing to drive current- account surpluses."

Emerging nations from Brazil to Indonesia have won credit- rating upgrades in the past year as governments contained budget deficits. A higher assessment for the Philippines will help Aquino as he moves to boost spending to a record this year and seeks $16 billion of investment in roads, bridges and airports to shield the economy from Europe's sovereign-debt crisis.

The Philippine peso (₱) is up 4.8 percent against the dollar in 2012, the best performer in a basket of 11 major Asian currencies tracked by Bloomberg. The Philippine Stock Exchange Index climbed to a record this week. The benchmark seven-year bond yield fell to the lowest in at least two months yesterday.

'Very Positive'

S&P's recognition for the Philippines' strong external position, growth prospects and improving fiscal sector adds fundamental support to the market, Bangko Sentral ng Pilipinas Governor Amando Tetangco said yesterday after the ratings action.

Moody's Investors Service boosted its outlook on the Philippines to positive in May 2012, citing improving debt levels. Fitch Ratings raised the country's debt to one step below investment grade in June 2011.

S&P's move is "very positive because it promotes the country's macroeconomic and fiscal context," said Fitz Aclan, who helps manage ₱850 billion pesos ($20.4 billion) at Manila- based BDO Unibank Inc. "There could be some upward movement for our sovereign bonds, even our local bonds. This will also be positive for equities."

Aquino plans to narrow the budget shortfall to 2 percent of gross domestic product by 2013 from a target of 2.6 percent this year. The government has stepped up efforts to catch tax evaders and smugglers, and has drawn up bills aimed at increasing revenue to narrow the fiscal deficit.

"We expect further rating improvements will likely be driven by either our appraisal of improving political and institutional factors or by evidence of a sustainable structural revenue improvement," S&P said. "Conversely, we may lower the ratings if the government's commitment to fiscal consolidation weakens, resulting in rising debt, or if the external liquidity position deteriorates significantly."

The $200 billion economy grew 6.4 percent in the first quarter, the fastest pace since 2010. Aquino is aiming for an expansion of as much as 8 percent annually to cut poverty.

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Moodys upgrade rating of the Philippines 1 notch up -economy resilient

MOODY'S INVESTORS SERVICE has raised the Philippines' credit rating outlook to positive from stable as the government continues to reduce the fiscal deficit and public debt.

The move sets the stage for a possible upgrade of the Philippines' Ba2 credit rating -- two notches below investment grade -- in the next 12 to 18 months, Moody's Assistant Vice-President Christian de Guzman yesterday said in an e-mail.

The debt watcher is slated to visit the country in June as part of its "regularly scheduled surveillance activities," he added.

Finance Secretary Cesar V. Purisima, in a statement, said: "This is one more step in our march towards investment grade, towards reducing the gap between the market rating and the credit rating, and more importantly towards a more sustainable growth path".

The Aquino administration aims to secure its first-ever investment grade credit rating by 2016 in order to lower its borrowing costs and attract more foreign investors.

According to Moody's, among the key drivers behind the positive outlook were the government's "faster-than-expected" fiscal consolidation and active debt management.

"The government of the Philippines has continued to demonstrate prudence in its fiscal management, as characterized by low budget deficits relative to its rating peers and a steadily declining level of debt relative to GDP (gross domestic product)," it said in a report released yesterday.

The government trimmed its deficit to ₱2.885 billion as of April, just 1% of its P279.1-billion cap for this year. It was also kept at P197.754 billion in 2011, two-thirds of the ₱300-billion ceiling.

Moreover, national government debt fell to only 50.9% of the GDP last year, surpassing the target of 51.7% and the 52.4% posted in 2010.

"Such outcomes are the result of expenditure restraint and improved revenue performance," Moody's noted.

Revenue collections, in particular, have grown faster than the GDP in the past five quarters, solely due to tax administration measures, it added.

"We expect revenue growth to improve further upon the passage of legislation aimed at restructuring excise taxes on alcohol and tobacco products."

Moreover, the Philippines has successfully improved its public debt by lowering borrowing costs, lengthening maturities and reducing foreign currency exposure, Moody's said.

The government successfully concluded a $1.5-billion offer of 25-year global bonds in January, securing interest rates of only 5% -- the lowest ever achieved by an Asian sovereign for bonds with a tenor greater than ten years.

It also repurchased $1.3 billion in high-coupon, foreign-currency bonds last October, cutting borrowing costs by settling the debt papers before their maturity.

Other than an improvement in national finances, Moody's also cited the Bangko Sentral ng Pilipinas (BSP) for its "solid track record of inflation management."

"The sovereign's vulnerability to global financial market shocks has been reduced by the build-up of foreign exchange reserves, resulting in turn from robust current account surpluses and healthy capital inflows in recent years," it added.

The outlook on the BSP's Ba2 credit rating was likewise raised to positive from stable yesterday.

While concerns still remain over the Philippines' large debt stock, it is mitigated by institutional features such as automatic appropriations in the budget for debt servicing, Moody's said.

"In addition, an increasingly large bond sinking fund provides an adequate buffer that guards against near-term liquidity pressures," the credit rater explained.

And as the global economic environment remains uncertain, the Philippine economy is stabilized by remittance inflows which support the balance of payments and spur domestic household consumption, Moody's said.

Overseas Filipino workers remitted a total of $4.842 billion in the first quarter, posting a 5.4% growth year on year against the central bank's 5% projection.

In order to secure a credit rating upgrade, Moody's urged the government to continue the reduction of public debt and pursue reforms to increase revenues. It must also accelerate public spending in areas of the economy that would spur growth.

"These developments should also be accompanied by the continued health of the country's balance of payments and stability of the financial system," it said.

The Philippines, meanwhile, must be wary of macroeconomic instability which could trigger inflation. "A shift away from the focus on good governance" would also be detrimental.

For their part, economic managers hailed the impact of the Aquino administration's campaign of good governance.

"The message we have been trying to send ... is that fiscal performance can improve with good governance," central bank Governor Amando M. Tetangco, Jr. said.

"This positive rating action is therefore welcome and is a sign that Moody's is seeing the fruits of good governance on all fronts: fiscal, monetary and external."

Mr. Purisima added: "The Aquino administration will continue to focus on good governance as the basis for good economics, on fiscal sustainability, on macroeconomic stability and on opening up the country to business and tourism."

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Philippines Buys Back $1.3 Billion Worth of Overseas Bonds

The Philippine Finance Secretary Cesar Purisima said Saturday (October 15, 2011) that the government's successful buyback of some foreign-currency sovereign bonds should help the country's cause to win investment-grade ratings from credit agencies.

Around $2.2 billion of the eligible $17.7 billion of global and euro bonds have been offered by bondholders in the Philippines' latest liability management efforts, which sought to repurchase around $1.5 billion in foreign debt. The government accepted bonds with nominal principal amount of $1.3 billion and will pay bondholders a total $1.7 billion, including the purchase price and accrued interest.

Of the $17 billion debt that qualified for repurchase, about $2.2 billion of bonds were offered by investors, the government said. The nation will use mostly internal funds for the buyback, and the $1.7 billion figure includes accrued interest along with the bonds' original price, it said in the statement.

The $200 billion Asian economy is reducing its budget deficit, extending debt maturity and cutting its foreign- currency risks to achieve a higher credit rating. The administration of President Benigno Aquino had conducted bond exchanges and sold peso-denominated bonds to overseas investors since starting a six-year term in June 2010.

Purisima said the bond repurchase is "in line with our ongoing objective to rebalance our debt portfolio in favor of local currency. This should be supportive of our effort to obtain investment-grade ratings," he added.

The government expects savings of around $165 million in "net present value" from the buyback, Finance Undersecretary Rosalia de Leon said. Bonds due from 2013 to 2032 were accepted for purchase by the government in a transaction to be settled this month, according to the statement.

"This exercise highlights our strong liquidity and prudent debt management policy amid global volatility," Treasurer Roberto Tan said in the statement.

Despite recent upgrades from all three major credit agencies, Philippine debt still remains in junk territory. Fitch Ratings ranks Philippine debt a notch below investment grade while Standard & Poor's and Moody's Investors Service both place Manila's debt two notches below investment grade. A higher rating should save the Philippines, one of Asia's most prolific sovereign debt issuers, millions in debt services annually.

Purisima said the invitation to sell bonds back to the Philippines drew both local and international investors, and bonds accepted by the government have maturities spanning 2013 and 2032.

The bond repurchase will be financed with internal funds of the National Treasury. The government is currently offering to the public 10-year and 15-year peso-denominated retail treasury bonds, and hopes to raise over ₱200 billion (Php) Philippine Peso in the bond sale, the proceeds of which may also be used to pay for the repurchased foreign-currency bond.

National Treasurer Roberto Tan said the liability management exercise underscores the Philippines' "strong liquidity and prudent debt management policy amidst global volatility."

The transaction is expected to be settled on October 25, 2011.

For more updates, follow the Hikot's Philippines Economy Network.

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