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On Thursday, S&P Global Ratings confirmed its credit ratings for the Philippines, but pointed out such downside risks such as rising government debt stocks.
In its latest report, S&P maintained its long-term sovereign credit rating on the Philippines at “BBB +†with a stable outlook – two notches above the minimum investment rating – that the country received in April 2019 .
This is the higher end of the BBB rating, which indicates that a debtor has “adequate capacity” to meet its financial commitments, but that adverse economic conditions or changing circumstances are more likely to weaken its capacity. to honor its financial commitments.
“We have confirmed the ratings because we believe the Philippines will continue to have good prospects for economic recovery once the COVID-19 pandemic is contained, and the government’s fiscal performance will strengthen as a result,” S&P said.
S&P also maintained its short-term sovereign credit rating on the Philippines at “A-2”, meaning that a debtor has “satisfactory capacity” to honor its financial commitments, but is somewhat more sensitive to the effects. unfavorable changes in economic conditions as debtors of a higher category.
This comes as the Philippines has experienced an economic contraction over the past five quarters. Gross domestic product (GDP) was -4.2% in the first quarter, following -9.6% in 2020, which was the worst annual recession on record.
The credit observer said he could raise the score over the next two years if the economy recovers faster than expected and the government achieves faster fiscal consolidation.
S&P noted, however, that it could lower the Philippines’ credit rating if there is a sustained annual change in net government debt above 4% of GDP and debt above 60% of GDP, or higher interest payments. at 15% of income. on a sustained basis.
“We could lower the score if the Philippines’ nascent economic recovery weakens over the next 24 months, leading to a significant erosion in the country’s long-term trend growth rate, or an associated deterioration in the government’s fiscal and debt position. beyond our forecasts, “It said.
“The country’s debt and fiscal measures have weakened amid the severe recession caused by the pandemic. However, we expect stabilization and improvement on these fronts as the economy recovers,” he said. added.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said last week that economic officials were monitoring the debt-to-GDP ratio to remain below the internationally recommended 60% threshold.
“We share the responsibility for public sector debt management with the Ministry of Finance, the Development Budget Coordination Committee and the Investment Coordination Committee,” he said at the time.
The Philippines ended 2020 with a debt-to-GDP ratio of 54.6%, up from 39.6% at the end of 2019.
For his part, the finance secretary Carlos Dominguez III welcomed the affirmation of the credit ratings of the Philippines.
“The Philippines, like the rest of the world, has suffered from the shocks of the health and economic crises caused by the pandemic,” he said in a separate statement.
“But strong financial cushions and prudent fiscal management have placed the Philippines in a relatively strong position to generate the funds needed for the COVID-19 response without triggering a worrying debt situation later,” he added. .
The BSP Monetary Board approved foreign loans worth $ 15.5 billion to fund COVID-19 relief efforts as of May 7, 2021.—AOL, GMA News
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