EIU raises PH sovereign risk rating

By Kathleen A. Martin, The Philippine Star

Posted at Jul 14 2014 06:50 AM | Updated as of Jul 14 2014 02:50 PM

MANILA - The Economist Intelligence Unit (EIU) has upgraded its sovereign risk rating for the Philippines to BBB from BB to reflect ongoing improvements in the country’s public debt position.

The Philippines’ sovereign risk rating was raised to BBB from BB as its debt-to-GDP (gross domestic product) ratio slid to 49.2 percent in 2013 from 54.8 percent in 2009.

“As a proportion of GDP, expenditure will rise gradually as the government seeks to increase social spending, particularly on vital infrastructure. This will help boost economic expansion and revenue collection,” the EIU said.

The country’s political risk rating was also upgraded to B from CCC following the peace agreement between the government and the Moro Islamic Liberation Front (MILF). This item assesses the potential impact of political events to a country’s ability to pay for its debts.

“The security situation in the Philippines should ease in the coming years following the signing in March of a comprehensive peace agreement between the government and the Moro Islamic Liberation Front (MILF), which in theory, puts an end to a decades-long conflict,” the EIU said.

“The recent peace deal with Muslim rebels in southern Philippines bodes well for stability,” it said.

Earlier this month, the government and the MILF have agreed to meet again in Malaysia to further iron out issues on the proposed Bangsamoro basic law.

The EIU has kept the country’s currency risk rating at BBB, the banking-sector risk rating at BB, and the economic-structure risk rating at BB.

Government officials earlier this month met with representatives from the EIU on the sidelines of the non-deal roadshow for investors held in London.

Finance Secretary Cesar Purisima, National Treasurer Rosalia de Leon, and Bangko Sentral ng Pilipinas Assistant Governor Ma. Cyd Tuano-Amador discussed the latest economic developments of the country with EIU Regional Editor Asia Duncan Innes-Ker.

“Policy and administrative reforms have already led to significant gains in the country’s debt profile and the overall macroeconomic picture,” Purisima said.

“The commitment to ensure sustainability of this trend is firm,” he added.