Bangkok--30 Jul--Standard & Poor's
- Strong external liquidity and signs of improving growth prospects are balanced against enduring fiscal weakness, with high, albeit improving, debt ratios.
- We are affirming our 'BB/B' foreign currency and 'BB+/B' local currency sovereign rating on the Republic of the Philippines. At the same time, we are affirming our ASEAN scale rating of 'axBBB+/axA-2' on the Philippines and the issue ratings on the outstanding debt.
- The stable outlook reflects our expectation that remittances will continue to drive current account surpluses, while the weak fiscal profile will take more effort to address.
Standard & Poor's Ratings Services today affirmed its 'BB/B' foreign currency and 'BB+/B' local currency sovereign credit rating on the Republic of the Philippines. The outlook is stable.
At the same time, Standard & Poor's affirmed its 'axBBB+/axA-2' ASEAN scale rating, 'BB' foreign currency senior unsecured issue rating, 'BB+' local currency senior unsecured rating, and 'B' short-term local currency debt rating on the Philippines.
Standard & Poor's also affirmed its recovery rating of '3' on the Philippines, which denotes our expectation of 50%-70% recovery in the event of a distressed debt exchange or payment default. The transfer and convertibility assessment of 'BB+' is unchanged.
"The rating on the Philippines is constrained by the country's relatively low income level, weak fiscal profile, and high, albeit improving, public sector debt and interest burden," said Standard & Poor's credit analyst Agost Benard. "Strong external liquidity, low external liability position, and a record of moderately strong economic growth support the rating."
"The stable outlook encapsulates our expectation that remittances and BPO receipts will continue to drive current account surpluses, while prevailing government debt and interest burdens and the weak fiscal profile will take time to resolve," Mr. Benard added.
Standard & Poor's may raise the ratings on evidence of material progress in achieving a sustainable structural revenue improvement, or further strengthening of the external balance sheet, yielding reduced vulnerability to shocks. Conversely, we may lower the ratings if a weakened commitment to fiscal consolidation results in a heavier debt burden, or if the external liquidity position deteriorates significantly, possibly precipitated by unfavorable macroeconomic policies or political instability.
RELATED CRITERIA AND RESEARCH
Sovereign Government Rating Methodology And Assumptions, June 30, 2011
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contacts:
John Piecuch, New York (1) 212-438-1579,
[email protected]
Analyst Contacts:
Agost Benard, Singapore (65) 6239-6347
Takahira Ogawa, Singapore (65) 6239-6342