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- Category: Top News
- 10 May 2014
- Written by Bianca Cuaresma
ECONOMISTS believe it is likely that another upgrade is due the Philippines this year from other major credit watchers, given the country’s strong economic prospects for this year and next.
The BusinessMirror sought their views on the possibility of another raise in the ratings for the Philippines—this time from Moody’s Investors Service and Fitch Ratings.
On Thursday Standard & Poor’s (S&P) upgraded the country’s sovereign credit ratings to “BBB” from “BBB-.” What this meant was that for S&P, the country is now on the second of three steps in the investment-grade status. This was the highest rating that the Philippines has been awarded to date.
“Yes. I think Fitch and Moody’s will follow along. After all, the same macro story is seen by all these [rating agencies], and it’s very easy to see that a macro story is hard to contest,” Security Bank economist Patrick Ella said in an e-mailed response to the BusinessMirror.
In its earlier visit to the Philippines, Fitch maintained its rating for the country and left its outlook unchanged. Moody’s was the only one among the three major rating agencies that assigned a “positive” outlook for the country, which meant that the country can be up for an upgrade in the next 12 to 18 months after its recent rating assignment. Moody’s lifted the country from the junk status to investment grade in October last year.
“It is likely that other ratings agencies would review their recent assessment,” ING Bank economist Joey Cuyegkeng said in a separate response to the BusinessMirror.
First Metro Investment Corp. Senior Vice President and Head of Financial Markets Group Reynaldo Montalbo Jr. is also of the view that Fitch and Moody’s may follow S&P’s action, but “not necessarily immediately.”
Montalbo also said the most immediate impact of the recent S&P upgrade would be seen on the interest-rate differential between local yields and the US treasuries as it would likely tighten due to the positive sentiment on the Philippines.
“The 10-year differential has been hovering at around 170 to 180 basis points. This is very wide considering our strong economic fundamentals, the slow US economic recovery and the very predictable Fed quantitative easing taper. This differential, especially on the long end, 20 to 25 years, should tighten as a result,” Montalbo said.
The local financial markets, likewise, reacted swiftly to the S&P upgrade. On the last trading day of the week, the Philippine Stock Exchange index was up by 1.21 percent while the peso regained its value back in the 43 territory—appreciating by more than half a peso on Friday on the back of the Philippines upgrade.
“In an environment of calm in US monetary policy, our economic fundamentals would dominate and support Philippine financial markets and economy,” ING’s Cuyegkeng said.
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