BSP: PH is 2, 3 notches underrated

BSP: PH is 2, 3 notches underrated

BY JIMMY C. CALAPATI

The Philippines should be getting another credit rating upgrade soon, Bangko Sentral Deputy Gov. Diwa Guinigundo said.

"We did some case studies and these showed we were two to three notches underrated," he said in an interview. "This means that if properly considered, the Philippines should be investment grade."

All three major credit rating agencies – Moody’s, Standard & Poor’s and Fitch – recently gave the country’s credit rating an upgrade, placing it one or two notches below investment grade.

He said what the BSP studies did was replicate what the credit rating agencies do to assess a country’s ability to pay its debts.

"We presented the findings to the credit rating agencies as early as October last year and we presented these again during the last meetings, especially with Fitch," Guinigundo said.

He said based on the studies, the country’s credit default swap and debt spread are nearer those of jurisdictions with higher credit ratings.

"Now take a look at the Philippines and consider its economic fundamentals – inflation rate, reserves coverage, growth rate, external payments position as a percentage of the cost of goods and services, debt service ratio. Then compare these to the Philippines’ peer group. The latter has higher credit ratings," he added.

"We deserve a second look. But we are not preempting what credit rating agencies should be doing because they have their own timing, they have their own basis for appreciating the numbers that we give," Guinigundo said.

"Depende yon sa kanila but given the upgrades that we received as well as the upgrades in terms of the outlook, it looks like we are in the right direction," he added.

If the fiscal position will continue to improve and the macroeconomy, particularly the external payments position, remains strong, the country can expect a further upgrade, Guingundo said.

Fitch, last month, place the country one notch below investment grade with a rating of BB+/Fitch cited the Philippines’ progress on fiscal consolidation and its strong external finances.

"The upgrade reflects progress on fiscal consolidation against a track record of macro stability, broadly favorable economic prospects and strengthening external finances," said Andrew Colquhoun, head of Fitch’s Asia-Pacific sovereigns team.

Colquhoun said that the Philippines’ five-year average growth rate of 4.9 percent is above the BB range median of 4 percent, but not enough to close the gap in average income quickly.

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