MANILA, Philippines -- Nomura Securities said Moody's Investors Service and Standard and Poor's (S&P) may raise the Philippines' credit rating, a move that would bring the country one notch below the coveted investment-grade status.
“We expect Moody’s and S&P to play catch-up with Fitch, likely raising their ratings from Ba2/BB to Ba1/BB+ within the next 12 months. However, an investment grade rating is not imminent, despite improvements in the sovereign credit profile,” the Japanese securities firm said in its latest country report.
Fitch Ratings Inc and Moody's raised their credit scores for the Philippines in June last year. Fitch lifted its score from BB to BB+, or a notch below investment grade. Moody's increased its rating from Ba3 to Ba2, or two notches below investment-grade.
S&P last December followed with an upgrade in its outlook from stable to positive, indicating it would raise the Philippines' credit score within a year.
Finance Secretary Cesar V. Purisima met with representatives of Moody's and Fitch while on a road show in London this week.
He said the two credit rating firms recognized the Philippines' better debt and revenue ratios, which resulted from the government's efforts to improve tax administration.
“I met with them to continue our dialogue on the strength and resiliency of the Philippine economy, as well as to discuss our view that the Philippines continues to be underrated,” Purisima said in a statement.
“The market has already recognized the Philippines’ resilience and the strength of our credit standing and is rating us as investment grade. In fact, our bond issuance in January marked the lowest US dollar coupon ever achieved by an Asian sovereign for a bond with a tenor greater than 10 years,” he said.
“The ratings agencies are very keen on our push for reforms on sin taxes. A World Bank study estimates that we could gain as much as 1.3 percent of GDP in additional revenues from reforms in the sin taxes such as uniform tax rates and indexation,” Purisima said. GDP refers to gross domestic product, which is the total amount of final goods and services produced in the country.
An investment grade rating would cut the Philippines' borrowing costs whenever it raises money in the financial markets. Furthermore, emerging from the current junk status would enable the country to draw investors who shun below-investment grade destinations.
More foreign investments would mean boosting the country's balance of payments surplus and swelling its gross international reserves. Ample reerves prop up the peso and helps keep domestic inflation at bay.
source: interaksyon.com
