MANILA, Philippines - The Philippines is seen to bag its first investment grade rating in history in the next 12 to 18 months as solid fundamentals continue to work on its favor, Barclays said in a report.
“Our base case is for the Philippines to receive its first investment grade rating in the next 12-18 months, although it may take a little longer for it to receive such a rating from two out of the three main agencies,” Barclays said in the report titled “Philippines: The Rising Star.”
Standard & Poor’s Rating Services last Wednesday upgraded the country’s debt to BB+, one notch below investment grade and at par with that given by Fitch Ratings last year. Moody’s Investors Service, meanwhile, rates the Philippines at two notches under investment grade.
Barclays said the Philippines sovereign credit rating is in a “positive trajectory.”
“After Indonesia received investment grade ratings, the market’s focus turned to the Philippines as the next potential candidate in Asia,” the investment bank said.
It pointed to recent developments such as the passage of laws strengthening the fight against money laundering, contained budget deficit, moving public-private partnership (PPP) projects and a manageable inflation as reasons for its optimism.
Political stability was also noted with the report, claiming President Aquino III remains “popular and has a strong mandate,” following the conviction of former Supreme Court Chief Justice Renato Corona.
“With this case out of the way, we believe the government can focus on addressing key areas, such as infrastructure (through PPPs), and passing important legislation, such as fiscal incentive rationalization, “sin” taxes and progress on privatization,” Barclays said.
The government is pushing for the passage of the bills that will increase taxes on tobacco and liquor products as well as rationalize incentives to generate more revenues. Both bills are now slated for discussion once Congress opens its new session on July 23.
Still however, the national government’s five-month budget deficit remains far below the P109.341-billion ceiling for the first half, hitting only roughly P23 billion, with revenues rising by 11 percent during the period.
Meanwhile, Barclays said “foreign interest in PPP projects has increased.”
“In line with our expectations, the administration’s public-private partnership (PPP) program, worth an estimated P200 billion is gaining momentum, marking another improvement in the overall investment climate,” it explained.