NICE Investors Service lauds government reforms, rising infrastructure investments
The Credit image of the Philippines got another boost with the latest positive rating action from NICE Investors Service, which cited governance reforms and investment prospects resulting from an intensified campaign for infrastructure development.
NICE upgraded the country’s credit rating by a notch from the minimum investment grade of BBB- to BBB. The move has tightly secured the Philippines’ place within the investment-grade territory.
In a statement released Wednesday, NICE said the upgrade was anchored on “improved government transparency as well as enhanced environment backed by expanded infrastructure and social overhead capitals in the form of public-private partnerships.”
The upgrade came amid sustained rise in infrastructure investments. From 1.8 percent of gross domestic product in 2010, the government’s infrastructure budget rises to 5 percent of GDP this year.
Also, infrastructure contracts amounting to $4.8 billion has been awarded to private-sector investors since 2010, making the Aquino administration the most active in promoting public-private partnerships for infrastructure.
The Philippines’ new credit rating with NICE is assigned a “stable” outlook, indicatingit may stay the same at least over the short termdespite challenges posed by external developments.
Compared with peers, NICE said, the Philippines is seen more resilient to shocks, including the impact of a slowing Chinese economy and market volatility arising from higher interest rates in the United States.
“Considering its trade structure and strong FX [foreign exchange] liquidity, the impact of global economic uncertainties such as slowdown of Chinese economy and US interest rate hike will be manageable,” NICE said.
The credit watchdog expects the Philippines to sustain a robust economic growth of 6.3 percent over the medium term.
Meantime, economic officials welcomed the latest credit-rating upgrade, which marks the 24th positive rating action for the Philippines under the Aquino administration (9 outlook changes to “positive” and 15 actual hikes in credit ratings from various agencies).
“The string of favorable actions from credit rating agencies, the latest of which is from NICE Investors Service, resonates the process of economic strengthening that the Philippines has undergone over the years. Contributory to this process were sound monetary policy and bank supervision, which have played crucial roles in promoting a stable inflation environment and a strong financial system,” BSP Governor Amando M. Tetangco, Jr. said.
Finance Secretary Cesar V. Purisima remarked, “Virtuous cycles come from dogged discipline, even when political headwinds seem too strong. Expanded fiscal space has opened up a pandora’s box of opportunities in infrastructure, allowing us to play a fast game of catch-up with our neighbors.
With increased transparency, we have empowered citizens who participate in the process of governance, and who–having known the gains reforms can bring–will refuse to roll back progress.” Purisima also noted that with this latest credit rating action, Fitch remains the only agency to assign the minimum investment grade to the Philippines.
The Investor Relations Office (IRO) said upgrades in credit ratings have provided concrete benefits for the economy, including improved business confidence and reduced borrowing cost for the government. The latter has helped lower commercial lending rates for consumers and businesses as well.
“The investment grade sovereign credit ratings that the Philippines now enjoys are a result of a long a tedious process of economic transformation. Taking the country’s favorable credit image for granted — and reversing the reforms implemented over the years — would be costly. It is upon each Filipino to see to it that the economic transformation of the Philippines is sustained over the long haul,” Martin said.