BSP chief says S&P credit rating, outlook 'a big vote of confidence' for Philippines

ABS-CBN News

Posted at May 31 2020 11:01 AM

MANILA - Debt watcher S&P's BBB+ long-term credit rating with a stable outlook for the Philippines is a "big vote of confidence," Bangko Sentral ng Pilipinas governor Benjamin Diokno said Sunday as Metro Manila prepared to ease into general community quarantine amid the COVID-19 pandemic.

"This is a big vote of confidence coming from the rating agency on the post-pandemic economic recovery of the Philippines," Diokno said in a statement.

A higher credit rating means the Philippines can access a wider pool of investors for debt and at lower interest.

"The Philippines is defying the global trend of rating downgrades and negative rating outlook as an aftermath of the health crisis and the subsequent containment measures of many governments," Diokno said.

S&P said the Philippine economy is likely to experience a contraction of 0.2 percent in 2020 due to the COVID-19 pandemic but it expects a "strong recovery in 2021, assuming that the global outbreak is generally contained."

"The Philippines' narrow net external asset position and monetary flexibility also continue to support the rating," it said.

"In our view, a deeper and more diversified financial and capital market would further boost the effectiveness of policy transmission and facilitate improved credit metrics."

Earlier this month, Moody's Investor Service also kept its credit rating and outlook on the Philippines, while Fitch Ratings downgraded its outlook on the country to stable from positive while keeping its score at one step below the minimum A.

The Philippines may carry out further monetary easing if necessary, Diokno said.

"While being mindful of our price and financial stability mandates, we are thinking outside the box to enact policies that ultimately help safeguard the lives and livelihoods of our people," he said.

The Philippines' first quarter GDP unexpectedly shrank 0.2 percent, the first contraction since 1998. The next 2 quarters could be worse as the full effect of the lockdown is reflected, analysts and economic managers said.

Metro Manila was placed under strict lockdown with most businesses shuttered until May 15. It is under a modified enhanced community quarantine until May 31, and will shift to general community quarantine beginning June 1.

Other urban centers such as Cebu and Davao will also transition into a looser lockdown or GCQ from June 1.