Standard & Poor’s, a renowned financial services company, unexpectedly raised the Philippines’ rating from BBB- with a stable outlook to BBB, likewise with a stable outlook. The upgrade was considered a surprise because the organization did not change its outlook to positive first. Nonetheless, it is the highest credit score the country has seen so far.
According to S&P, the score was raised because of the visible efforts implemented by the current administration in improving structural, administrative, and institutional factors, and governance.
Meanwhile, even with the upcoming 2016 presidential elections, the debt watcher is concerned with how momentum and direction of the country’s economic growth will be maintained. S&P further explained that the progress brought on by government-generated revenue, improved spending habits, progression of the country’s debt profile, and sound investment environment will buoy the economy from major challenges under the next administration.
In addition to that, the higher rating indicates the strong macroeconomic position of the nation, which in turn can help the country against external shocks. Two of the country’s dollar-earning industries are expected to not only offset trade deficits of 6-9 percent of GDP, but keep surplus levels at bay as well. These are remittances from Filipinos working abroad and services exports from the business process outsourcing industry.
One of the problems identified by the debt watcher is the high unemployment and underemployment, pulling the country’s income level down.
It also noted that growth challenges remain even with the improvements fuelled by structural changes that boosted the GDP from 3.2 percent five years ago to 4.3 percent this year.