MANILA, Philippines - The Philippines has to overcome hurdles before it can reach investment-grade rating, according to Standard & Poor's Ratings Services.
In its report, "The Race To Investment Grade: Indonesia And The Philippines," the credit rating agency acknowledged that both countries are making steady progress.
S&P noted that the improvements in the Philippines' political backdrop and policy setting led it to raise the sovereign credit rating to 'BB+' from 'BB' in July.
The move put the Philippines within one step of its bid for investment-grade status, which starts at "BBB-" in the S&P scale. But the S&P report noted that on average, it takes 2.5 years for a rating to move from 'BB+' to 'BBB-', based on historical performances.
"The stable outlook on the Philippines indicates that risks to the ratings are balanced," said Standard & Poor's credit analyst Agost Benard.
"The Philippines has narrowed its fiscal deficits, lessened its reliance on foreign savings, and rationalized the public sector. A more conducive political setting has replaced the turbulent and obstructionist environment that prevailed for well over a decade."
However, the S&P report said the Philippines has "a weak fiscal profile and high interest burden on its public debt, due to a narrow revenue base and the large portion of expensive commercial debt."
The Aquino administration, which enjoyed 8 positive credit rating actions in the last 2 years, has been pushing for an investment grade status.
The country currently has the highest credit rating from S&P and Fitch at one notch below investment grade. Moody's places the country two notches behind although with a positive outlook.