The Philippines remains on track toward securing an ‘A’ credit mark despite Fitch Ratings’ downgrade of its outlook to negative, with the Bangko Sentral ng Pilipinas (BSP) governor saying the country’s fundamentals remain intact and risks are largely external.
‘The Road to A agenda is still very possible. It’s just more difficult right now, but when these things go away, then we should be on that path,’ BSP Governor Eli Remolona Jr. told reporters.
Fitch Ratings recently affirmed the country’s ‘BBB’ investment-grade rating but revised the outlook to negative, citing rising risks from global energy shocks and external pressures.
Remolona emphasized that a negative outlook does not automatically lead to a rating downgrade.
‘Usually, when there’s a negative outlook, the next step would be a rating action, either an upgrade or a downgrade. But in the last year or so, that hasn’t really been the case. There have been instances where the outlook changes but the rating does not follow,’ he said.
He added that the outlook revision was not due to domestic weaknesses. ‘This negative outlook is not really because of us. It’s because of the external environment,’ Remolona said.
The BSP chief pointed to growing investor confidence in Philippine assets as a sign that the country remains on a positive trajectory, citing the planned inclusion of peso-denominated government bonds in a major global index.
‘A good sign of that is JP Morgan has decided to include our peso government bonds in their emerging markets bond index. That may be worth $5 billion to $6 billion in terms of additional inflows into our peso bond market,’ he said.
The Philippines is set to be included in the Government Bond Index-Emerging Markets (GBI-EM) series of JP Morgan Chase and Co. on Jan. 29 next year. The move is expected to further broaden the investor base and support liquidity in the government securities market.
Remolona also noted that while rating upgrades typically follow a positive outlook within a year, such patterns have not always held in recent periods.
‘With SandP, for example, we were already at BBB+ with a positive outlook, and usually that would lead to an upgrade to single A within a year. But that didn’t happen,’ he said.
Asked whether the government could still achieve an ‘A’ rating within the current administration, Remolona said the timeline would depend largely on global conditions.
‘Maybe if the external environment improves. That’s really the problem right now. It’s not us. Our fiscal and monetary policies are in good shape,’ he said.
The BSP has maintained that the Philippine economy remains resilient despite global headwinds, with solid growth prospects, manageable debt levels and a stable financial system supporting its investment-grade status.