Chinese agency gives PH Panda bonds ‘AAA’ rating

A Chinese credit rating agency gave the Philippine government’s planned 1.46-billion-renminbi Panda bonds the highest rating of “AAA” with a stable outlook, citing the country’s  strong macroeconomic fundamentals as plus factors for the debt score.

China Lianhe Credit Rating Co. Ltd. noted the Philippines’ “strong and consistent economic growth, low level of external debt and ample foreign and current account reserves.”

The rating agency said it also factored in the strong economic ties between Manila and Beijing and the Duterte administration’s “stable source of payment from growing government revenues” in its positive credit rating assessment for the Philippines’ planned issuance of renminbi bonds. 

“LianheRatings expects the Philippines to have a GDP growth of around 6.80 percent in 2018. At the same time, the unemployment rate of the Philippines is expected to remain stable and CPI [consumer price index] growth may stay within the target band [2 percent to 4 percent] set by the BSP [Bangko Sentral ng Pilipinas],” it said in a report released by the Philippines’ Finance Department Monday.

It said the successful implementation of President Rodrigo Duterte’s 10-point socioeconomic agenda, including the Tax Reform for Acceleration and Inclusion law, “will help the Philippines achieve more rapid and equitable economic growth in the following years.”

Lianhe said the country’s strengths were in its strong and consistent economic growth, with employment continuously improving; government debt ratios that are continuously improving and well covered by fiscal revenue; large remittance inflows that contribute to the country’s ability to earn foreign exchange; low level of external debt and the very strong capacity to repay these obligations; and stable source of repayment from growing government revenues. Julito G. Rada

“The Republic of the Philippines has a well-established institutional framework, but its governance capacity is moderate albeit improving remarkably in recent years,” Lianhe said in its report. 

It said the Philippines’ unemployment and inflation were “well under control” and enjoyed a sound and stable banking system despite being constrained by underdeveloped infrastructure and low GDP per capita. 

Lianhe also cited the country’s strong public financing strength “underpinned by narrow fiscal deficit, low level of government debt and strong capacity to serve the debt” as well as its external financing strength characterized by “a low level of external debt well covered by ample current account revenues and foreign reserves.”

“Additionally, China Lianhe Credit Rating Co., Ltd. also factors in the strengthened economic relations between the Philippines and China as well as the stable source of payment from growing government revenues,” the report stated. 

Lianhe also said the Philippines’ Panda bonds “have the lowest expectation of default risk.”

Topics: China Lianhe Credit Rating Co. Ltd
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