PHL positive credit ratings show inherent strength of economy

The monetary and fiscal chiefs of the Philippines on Tuesday said last week’s affirmation by Standard & Poor’s (S&P) of its investment grade rating on the Philippines only shows the integral strength of the domestic economy. (Photo: John Ong/Flickr)

MANILA—The monetary and fiscal chiefs of the Philippines on Tuesday said last week’s affirmation by Standard & Poor’s (S&P) of its investment grade rating on the Philippines only shows the integral strength of the domestic economy.

S&P, on April 28, 2017, affirmed the country’s ‘BBB’ rating with ‘Stable’ outlook on back of the country’s strong external payments position, which was due to sustained robust inflows of remittances, the low external debt, the good performance of the banking sector, and the government’s goal to sustain domestic expansion through its 10-point economic program.

It continues to see above six percent growth, as measured by gross domestic product (GDP), for the country with the 2017 to 2020 forecasts at 6.6 percent, 6.4 percent, 6.6 percent and 6.3 percent, respectively.

In 2016, the domestic economy expanded by 6.9 percent, which is among the highest in Asia for the period.

In a statement issued by the Investors Relations Office (IRO), Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the recent S&P ratings action “is recognition in part of sound and calibrated monetary policy and banking supervision that have helped steer the economy to its enviable position of strength even amid a challenging external environment.”

This, as S&P cited the central bank’s “ability to support sustainable economic growth.”

It considers as “broadly neutral” the impact of any financial or economic shocks on the economy because of the policies that have been instituted by the central bank.

”This reflects the central bank’s sound record in keeping inflation low and its history of independence,” it said, stressing its belief that “BSP’s new monetary policy measures will improve the effectiveness of monetary policy transmission.”

Tetangco said the central bank has “Institutionalized a host of reforms that serve crucial roles in maintaining price and financial stability.”

He said “these reforms also have helped improve the country’s external profile, which S&P recognized as one of the major strengths of the Philippines.”

“At the same time, the BSP has made it a point to be preemptive, exercising flexibility to introduce more reforms and to adjust policy levels, as deemed necessary, to guard against risks confronting the economy,” he added.

Similarly, Finance Secretary Carlos Dominguez III said the latest S&P ratings action on the Philippines further firmed up the government’s resolve to “go ahead full throttle” on its DuterteNomics agenda, which targets to increase infrastructure investment to enable the economy to hit a seven to eight percent GDP growth by the end of the Duterte administration in 2022.

He is hopeful that with this latest positive ratings action, lawmakers would see the importance of approving the proposed Comprehensive Tax Reform Program (CTRP) to “help guarantee the financial sustainability of its (government’s) aggressive expenditure program and human capital development.”

He said these spending is “meant to sharpen the country’s global competitiveness and grow its economy into upper middle-income status by 2022.”

“S&P has confirmed what international and domestic financial institutions plus the business community and other sectors have been saying all along—that the policy environment on the Duterte watch remains conducive to sustained high economic growth,” he said.

“This affirmation is one more incentive for the government to go ahead full throttle on its ‘DuterteNomics’ agenda to sustain the growth momentum and achieve economic inclusion on the President’s watch,” he added.