(Bloomberg) -- S&P Global Ratings said it revised the Philippines’ credit outlook to positive, putting the Southeast Asian nation closer to its goal of an ‘A’ sovereign rating.
The debt watcher maintained the Philippines’ long-term foreign currency debt rating at BBB+. But it upgraded the outlook to positive from stable, citing the country’s fiscal reforms, improved infrastructure and policy environment that have helped keep economic growth strong over the past decade.
“We may raise the ratings if our expectations of current account deficits tapering over the forecast period are realized,” S&P said in statement on Tuesday. A ratings upgrade could also follow if the government achieves more rapid fiscal consolidation, it said.
While an outlook change to positive doesn’t necessarily lead to a boost in ratings, its opens up such possibility and often helps government and businesses borrow at lower interest rates. The Philippines is rated Baa2 by Moody’s and BBB by Fitch Ratings, both one notch lower than S&P’s.
S&P’s action indicates “possible upgrade to an “A-” rating within 24 months, helping lower borrowing costs and making the country more attractive to investors,” the Bangko Sentral ng Pilipinas said in a statement. Governor Eli Remolona said its ample foreign reserves will protect the country against global economic fluctuations.
The debt watcher said the ratings outlook could revert to stable if the economic recovery falters and leads to a “significant erosion” of the trend for the country’s long-term growth. The view could also change if there’s an “associated deterioration” in the government’s fiscal and debt positions.
The Philippine economy remains one of the fastest-growing in Asia, although growth slowed to 5.2% in the third quarter as government spending slowed and exports declined.
S&P expects the Philippine gross domestic product to expand 5.5% this year, ahead of Indonesia, China and Singapore, but below Vietnam where it sees growth at 7.4%.
--With assistance from Ditas Lopez.
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