Philippines Wins S&P Upgrade as Aquino’s Changes Seen Enduring

The Philippines won a credit rating upgrade from Standard & Poor’s a year after it was raised to investment grade, aided by President Benigno Aquino’s efforts to improve the nation’s economy and government.

The long-term sovereign credit rating was increased one level to BBB from BBB-, with a stable outlook, S&P said in a statement yesterday.

“We raised the ratings because we now believe the ongoing reforms to address shortcomings in structural, administrative, institutional, and governance areas will endure beyond the current administration,” S&P said. ‘We believe the resulting gains in government revenue generation, spending efficiency, and the improvements in public debt profile and investment environment will at least be preserved in the medium term.’’

Aquino has overseen the resurgence of a nation once called the Sick Man of Asia and is seeking faster expansion to reduce unemployment and poverty. The benchmark stock index has climbed 15 percent this year, among the biggest gainers in Asia, buoyed by the longest stretch of inflows into Philippine equities since at least 1999.

Aquino, 54, is increasing spending to a record this year to lure investments and boost economic growth to as much as 7.5 percent after a 7.2 percent gain last year. Builder Ayala Land Inc., brandy maker Emperador Inc. and cement producer Holcim Philippines Inc. are among companies that reported higher profits in the last quarter on rising demand.

‘Good Seal’

Aquino’s single, six-year term as president will end in June 2016.

Moody’s Investors Service and Fitch Ratings upgraded the Philippines to investment grade last year. Moody’s has a positive outlook on the sovereign credit. S&P rates the Philippines higher than Spain, Russia, Brazil and India.

“This is a good seal from a third party that the Philippines is doing the right things and pursuing the correct economic and fiscal policies,” Steve Sevidal, chief investment officer at Manila-based United Coconut Planters Bank. “It will definitely be positive for the markets. This is an additional tailwind for the current rally in stocks.”

The peso has risen 1.4 percent against the dollar this quarter, the third-best performance among Asian currencies tracked by Bloomberg. One-month non-deliverable forwards on the Philippine peso rose 1 percent to 43.93 per dollar as of 7:40 p.m. local time yesterday, according to data compiled by Bloomberg. The upgrade was announced after the close of stock trading.


The rating change “reflects the country’s strong external liquidity and international investment position, combined with an effective monetary policy framework relative to the country’s income level; the Philippines has sustained low inflation and interest rate,” S&P said.

Bangko Sentral ng Pilipinas kept its benchmark overnight borrowing rate at a record low 3.5 percent yesterday even as it raised the amount of cash banks must hold in reserves.

“The BSP will continue to support sustained and inclusive economic growth amid a low-inflation environment,” Governor Amando Tetangco said in a statement after the upgrade. “We stand ready to adjust our monetary policy stance and adopt macro-prudential measures, as appropriate, to guard against risks that would unsettle inflation expectations and threaten the soundness of our financial system.”

Global bond yields showed investors ignored 56 percent of Moody’s Investors Service and 50 percent of S&P’s rating and outlook changes in 2012, more often disagreeing when the companies said governments were becoming safer or more risky, data compiled by Bloomberg show.

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