The Philippines is nearing its goal of achieving an investment grade credit rating, central bank Governor Amando Tetangco said as the government prepares to meet Standard & Poor’s, Moody’s Investors Service and Fitch Ratings.
“We are on a rating momentum,” Tetangco said in an e-mail reply to questions in Manila today. “If the rating agencies would continue to consider the national financial position, which really includes both the external and fiscal positions of the country, the Philippines is in fighting shape for further rating upgrade. We believe investment grade is within sight.”
Finance Secretary Cesar Purisima said yesterday he will “make the best case” to support the nation’s bid for a higher ranking when he meets ratings companies while in the U.S. for the annual meetings of the International Monetary Fund and World Bank this week. President Benigno Aquino won upgrades from Fitch and Moody’s this year after taking steps to narrow the budget deficit from a record in 2010.
“That’s what governments do,” said Agost Benard, a Singapore-based associate director at S&P. “It’s customary that at the sidelines they will meet with our principals in the hopes of convincing them that an upgrade is warranted,” he said.
S&P’s last rating update on the Philippines was in July, when the country’s BB foreign currency sovereign ranking was affirmed, Benard said when asked whether the company plans to change the Southeast Asian nation’s credit grade.
Benchmark five-year bond yields dropped to the lowest level this year on Sept. 1, according to Philippine Dealing & Exchange Corp. The rate has gained since then as Europe’s failure to resolve its debt crisis prompted investors to sell emerging- market assets on concern global growth will slow.
Higher credit ratings would allow the Philippines to borrow at a cheaper cost, Tetangco said.
Fitch raised the country’s debt to BB+ on June 23, bringing it to one step below investment grade. Earlier that month, Moody’s upgraded the Philippines to Ba2, the highest level since the start of 2005. S&P increased the nation’s rating to the second-highest non-investment grade in November.
The government had a budget deficit of 43.713 billion pesos ($1 billion) in the seven months through July, less than the 191.2 billion-peso target for the period. The government plans to narrow the 2012 budget deficit to 2.6 percent of gross domestic product, or about 286 billion pesos, from a target of 3 percent, or about 300 billion pesos, this year.
A record level of international reserves, the reduction in the country’s external debt to less than half of what it was about a decade ago as a percentage of GDP, and progress in narrowing the budget deficit supports the Philippines’ case for higher ratings, Tetangco said.
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