Credit rating upgrade bodes well for Philippines global bond offering

December 15, 2017

The  recent upgrade by Fitch Ratings of the Philippines’ long-term foreign currency rating to “BBB” augurs well for the Philippines’ next global bond offering and provides a endorsement of the Duterte administration’s economic strategy anchored on a comprehensive tax reform plan and an unprecedented infrastructure modernization program, according to the country’s top treasury and finance officials.

National Treasurer Rosalia de Leon welcomed the credit ratings upgrade by Fitch, which recently assigned a “stable” outlook, as the Bureau of Treasury (BTr) prepares the country’s next global bond offering this coming year while maintaining the borrowing mix at 80 percent from domestic sources and 20 percent from foreign markets, a statement by the Department of Finance (DOF) said Friday.

“We welcome this latest favorable action from Fitch, which is a resounding testament to the country’s sustained strong economic fundamentals and favorable growth trajectory. This augurs well for our next global bond offering even as the market has priced our bonds much tighter than our ratings,” De Leon said.

She said the primary focus of the Duterte administration’s economic team is “on delivering results to create more jobs and improve the lives of our people.”

Finance Undersecretary and Chief Economist Gil Beltran said the upgrade was the result of a stronger public sector finance outlook for the Philippines “brought about by improved tax administration and the expected passage of tax reforms, along with a prudent monetary policy in the face of global financial volatility.”

“Also, we have unveiled a ‘Build, Build, Build’ infrastructure program, sectoral reforms and a list of Ease of Doing Business programs that will enhance the competitiveness of domestic industries and boost GDP growth to seven to eight percent in the medium term,” Beltran said.

Fitch’s upgrade of the Philippines’ credit rating was the first since March 2013. Its rating for the Philippines is now at par with those of S&P Global Ratings and Moody’s Investor Service.

Finance Secretary Carlos Dominguez III said earlier that numerous international banking institutions, including European banks, have expressed interest in the Philippines’ planned $1 billion dollar-denominated global bond float early next year.

Deputy Treasurer Erwin Sta. Ana also said banks and potential investors have been providing positive feedback on the planned Republic of the Philippines (ROP) bond issuance.

According to the BTR, the government plans to borrow P888.227 billion in 2018, with 20 percent or P176.269 billion of the amount sourced from foreign markets.

Dominguez said, "We are pleased that Fitch is finally convinced that the Philippine economy now is much stronger and more resilient than in 2013, when they granted the Philippines its first investment grade credit rating of BBB-.” DMS