May 16, 2014

Philippines Hits Positive Rating from S&P

Once again Philippines was able to sustain a positive rating from foreign credit rating agency, Standard and Poor (S&P). From previous BBB-, Philippines credit rating was upgraded one notch higher to BBB. Which means that Philippines is now at par with Colombia, Italy, and South Africa; and, higher than Spain, Russia, and Brazil.

Before the specifics, it is good to examine the rating code and their ranking. Based on S&P website, the highest rating is AAA and the lowest is D. looking at the above table, Philippines is already on the top rank even though a (+) and (-) sign can be put on each rating category to define category standing (e.g. BBB+ is higher than BBB-).

In passing, the purpose of credit rating is to measure the capacity of an obligor to meet the obligation. Currently, Philippines is rated BBB which means that the country exhibits sufficient protection parameter. However, negative economic circumstances can affect the capacity of the obligor to meet the obligation.

World Bank expects that the Philippines economy will grow by 6.6% this year; Philippine Economist forecast is 6.5% - 7% (see article: http://www.phileconomist.com/2014/01/philippines-2014-on-steady-side.html#.U3TpifmSw0I). In the present, high unemployment and inequality remains the main challenge for the government.

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