WHILE most economies are at a risk of credit downgrades in the face of economic volatility, the Philippines is one of only two countries in Southeast Asia that may see sovereign credit rating improvements.
Together with Indonesia, the Philippines embodies positive macro-economic fundamentals evident in the sustained high gross domestic product growth, sufficient external buffers, and high-quality policies that make it qualified for a credit upgrade.
“The (Philippine) economy is not only growing based on external factors, but there is internal demand, giving rating agencies confidence that the economy will continue to expand,” said Standard Chartered Asia head of public sector Kerby Leggett in a press briefing on Thursday. He conducted the briefing during the ASEAN Finance Ministers’ meeting in Lapu-Lapu City.
Generally, sovereign credit ratings indicate a country’s capability to pay back an obligation, and are an implicit forecast of the likelihood of the debtor defaulting. In addition, investors consider a good credit rating when looking to invest in a particular country.
“There is a one in three chance that the rating will go higher for the Philippines,” said Leggett, whereas the general trend in most countries, especially in advanced economies, is for credit ratings to be revised downward.
While the Philippines holds bright prospects for credit rating improvements, there are also risks. The first cause of concern is the United States’ protectionist stance under the Trump administration, the impact of the Brexit, as well as global economic uncertainties.
While Leggett commends the Duterte administration’s 10-point socioeconomic agenda, especially on infrastructure investments, what is more vital is its successful implementation.
The “political noise” in the country may affect credit rating, but that factor plays a minor role.
While the global economy grew by only 3.4 percent in 2016, the Association of Southeast Asian Nations economies grew faster, at 4.5 percent.