By Bianca Cuaresma, March 7 2019; Business Mirror

Image Credit to Business World

THE Philippine economy is looking at more credit rating upgrades “in the coming years,” due largely to its robust growth story and ability to sustain expansion amid global headwinds, a Bangko Sentral ng Pilipinas (BSP) official said on Wednesday.

In a recent speaking engagement in Makati City, BSP Deputy Governor Chuchi Fonacier said the Central Bank is “very optimistic” about getting more upgrades, especially “with the way the local economy is growing.”

Fonacier, in her speech, said the Philippine economy “has been growing consistently for the past 20 years notwithstanding events such as the global financial crisis and bouts of commodity price fluctuations.”

“Over the medium term, we remain optimistic about the country’s growth prospects. Notwithstanding the challenging external environment, the annual growth target for the next three years has been maintained at 7 to 8 percent on the back of solid domestic demand,” Fonacier said.

The deputy governor also expressed confidence in the country’s ability to push further its growth path this year despite forecasts of a slower global growth for 2019.

The International Monetary Fund (IMF), for example, released its World Economic Outlook (WEO) in January 2019, cutting its global 2019 growth projection to 3.5 percent, from the 3.7 percent outlook earlier.

“While we are not completely immune from the external headwinds, we believe that we have sources of resilience that will keep the economy stable,” Fonacier said.

Of the three major credit watchers, only S&P Global Ratings has a “positive” outlook on the Philippine economy’s ratings. A positive outlook indicates a possibility of an upgrade in the next 12 to 18 months following its review of the economy.

Moody’s Investors Service and Fitch Ratings, meanwhile, assigned a “stable” outlook to their rating on the Philippines, which means that the rating will likely remain unchanged in the coming year.

In a webcast on Wednesday, S&P Director for Financial Institutions Ratings Ivan Tan said it is important for S&P to see improvements in the country’s fiscal metrics, the direction of the fiscal deficit and the quality of its fiscal program.

In April 2018, S&P revised its outlook of the Philippines from stable to positive on account of improvements in the Philippines’s policy-making settings which could “support a track record of more sustainable public finances and balanced growth over the next 24 months.”

“We may raise the ratings if the government’s fiscal reform program leads to further achievements over the course of the next 24 months. This would support more sustainable public finances and balanced economic growth prospects while maintaining stable fiscal deficits and net general government indebtedness,” S&P said in its April assessment.

“We may also raise the ratings if the government’s revenue enhancement measures lead to lower-than-expected deficits, which would have a knock-on effect on  net general government indebtedness,” it added.

However, S&P said it may revise the outlook to stable if the reform agenda stalls, if the  recalibrated fiscal program leads to higher-than-expected net general government debt levels, or if S&P deems that policy-making settings have otherwise regressed against expectations.