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Credit rating upgrade boosts PH eurobonds

The Philippine delegation holding a roadshow in Europe in preparation for the issuance of euro-denominated bonds said the upgrade of the country’s credit rating to “BBB+” from “BBB” with a “stable” outlook by S&P Global Ratings on Tuesday came at a perfect time.

The delegation, led by National Treasurer Rosalia de Leon in tandem with Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo, are visiting key European cities to discuss the strengths of the Philippine economy to investors. 

The upgrade was great news as an independent third party confirmed the solid economic narrative, they said.

S&P cited the country’s above-average economic growth, a healthy external position, and sustainable public finances. The upgrade put the Philippines at par with Mexico, Peru, Thailand, and Trinidad and Tobago, and a notch higher than the “BBB” ratings of Italy, Portugal, Hungary, Panama, and Uruguay.

De Leon said the upgrade by S&P was a “recognition of our sound policies on liability management.” 

“We have kept our debt in check—even as we invest more on infrastructure and social services. We are committed to fiscal discipline, and this makes the Philippines a truly creditworthy sovereign in the eyes of the international financial community,” she said.

Guinigundo said the one-notch upgrade by S&P “simply affirms the [Philippine] economy’s sustained strong performance capped by impressive policy and structural reforms that would ensure its positive long-term prospects.”

“With such an upgrade, this would bring more interest among foreign investors to participate in the growth process and in the end, further establish and strengthen the upward trajectory of the Philippine economy,” said.

Guinigundo expressed confidence the Philippines could be upgraded further to the “A” territory rating.

“The biggest challenge to us is to pursue sustainability: sustainability of policy and institutional reforms, growth and public finance. With splendid record, I am sure we can do it,” he said.

The planned issuance of Euro-denominated bonds is part of the Philippine government’s strategy to diversify sources of financing to support a robustly growing economy and the government’s efforts to address the country’s large infrastructure gap to increase productive capacity.

The roadshow in Europe, which started on Apri 26 and will end on May 3, covers key locations including Zurich, London, Paris, Frankfurt and Milan. 

The delegation team—which also includes director Elizabeth Medina-Navarro, head of the BSP’s Investor Relations Office, and director Dennis Lapid of the BSP’s Department of Economic Research—will meet about 20 fund managers from different financial companies daily. 

The upgrade by S&P puts the Philippines just a notch away from “A minus,” which is within the coveted “A” scale. 

A rating within the “A” scale will place the Philippines on the radar screen of even more investors. 

ING Bank Manila senior economist Nicholas Mapa said the upgrade was another vote of confidence for the Philippine economy.

“The upgrade limits the reliance on interest rate differentials to bolster the PHP as foreign flows are seen to continue even with less attractive carry trade opportunities,” he said. 

“Furthermore, the upgrade also shows that ratings agencies view the external position of the Philippines as favorable with its more than adequate level of gross international reserves and the proverbial “aces up our sleeves” in OF remittances and BPO receipts, two sources of FX akin to the Philippine dynamic,” he said.

Topics: S&P Global Ratings , Rosalia de Leon , Bangko Sentral ng Pilipinas , Diwa Guinigundo
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