Philippines’ dream of ‘A’ rating still alive, says S&P

Domestic-oriented economy should shield the Philippines from the worst effects of the US trade war, thus lifting hopes of securing the elusive ‘A’ credit rating. Photo by Ted ALJIBE / AFP

MANILA, Philippines – The Philippines still has a chance to bag the coveted “A” credit rating despite the tariff-induced global headwinds, S&P Global Ratings said, as the domestic-oriented economy would be less affected by the US trade war.

In a webinar on Tuesday, Rain Yin, director at S&P, said the debt watcher’s prevailing “positive” outlook on the Philippines means it expects the country to sustain “constructive trends” despite the brewing trade storm.

What fueled this outlook was the relatively low “reciprocal” tariff of 17 percent that US President Donald Trump had initially imposed on Filipino goods coming to America.

READ: Philippines seen to weather US tariff shocks

At the same time, Yin said that the Philippines remains a domestic-driven economy, setting it apart from other Asia-Pacific nations that heavily rely on foreign trade for growth.

“The Philippines is probably going to be less affected than other countries in the region. It has one of the lower initial reciprocal tariff rates and does not have very large bilateral trade surplus with the United States,” she said.

“With the current positive outlook, we are expecting that the constructive trends that we are seeing in the Philippines—namely its strong growth trajectory, narrowing current account deficits and fiscal consolidation—will enable us to raise the rating in the next one or two years,” she added.

Positive outlook

Late last year, S&P kept its “triple B plus” investment grade rating for the Philippine sovereign and upgraded its outlook on the country to positive from “stable.”

A positive outlook indicates a good chance for the country to finally bag its first ever A-rating from one of the “Big Three” credit rating agencies in the next one to two years.

The higher rating means better perception of lenders on a borrower’s ability to pay its obligations. This would result in lower interest rates for issuers like the government, which can channel the interest savings to more productive spending like social programs and infrastructure build-up.

Moving forward, Yin still warned that S&P might downgrade its outlook on the Philippines if the global tariff onslaught would deal a heavy blow on the local economy.—