BSP says ‘A’ credit rating by 2028 still possible

THE PHILIPPINES could still obtain an “A” credit rating before the Marcos administration steps down even after credit rating agencies expressed concerns over the country’s heightened exposure to the Middle East war, the Bangko Sentral ng Pilipinas (BSP) said.

“It’s still very much possible,” BSP Governor Eli M. Remolona, Jr. told reporters on Thursday. “It is just hard right now but, when or if these things go away then we should be back on track.”

Fitch Ratings’ downgraded its long-term foreign-currency issuer default outlook for the Philippines last week to “negative” from “stable,” but kept its rating at  “BBB.”

S&P Global Ratings also revised its outlook for the Philippines earlier this month to “stable” from “positive” but affirmed the country’s “BBB+” long-term rating.

Both credit ratings agencies cited risks to the country’s growth prospects due to its exposure to the Middle East war.

Mr. Remolona said the target can still be reached if the external environment improves.

He added that the looming entry of the peso government bonds into JPMorgan Chase & Co.’s Government Bond Index-Emerging Markets (GBI-EM) could also be positive for the credit rating.

“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 added to the index starting Jan. 29, which is expected to drive foreign participation in bond issues here and improve pricing conditions for government borrowing.

JPMorgan’s GBI-EM tracks sovereign and quasi-sovereign bonds issued in emerging markets. Global peso notes were removed from the index in January 2024 due to illiquidity concerns.

Eligible securities include peso-denominated government bonds issued from 2023 with maturities of up to 20 years.

The Philippines was placed on “Index Watch Positive” seven months before the announcement.

Economy Secretary Arsenio M. Balisacan noted that the cautious credit outlooks was a global trend, with other countries also highly exposed to the Middle East war.

“I think everybody in every economy is likely going to have that kind of challenge because we’re not the only country that faces this challenge. Whether the rating is reduced or not, I don’t think we will be constrained from doing what we need to do in so far as our medium-term and long-term objectives are concerned,” he told BusinessWorld on the sidelines of an event at midweek.

He expressed hope that the economy can recover its growth momentum after the Iran crisis is resolved. — Aaron Michael C. Sy