PHL deserves investment grade rating, say Melbourne’s ANZ Group

The Philippines deserves an investment grade rating from international credit rating agencies, Melbourne-based Australia and New Zealand Banking Group Ltd. (ANZ) said in a report Thursday.   Global markets have priced Philippine sovereign risk at investment grade for some time now, although rating agencies have rated the Philippines below investment grade, ANZ said in its latest Asia Pacific Economics Report.   “We thus view the near-term likelihood of sovereign rating upgrades towards investment grade as warranted,” according to ANZ.   “Some hesitancy at the investment grade threshold is understandable in the event of economic, policy, or political risk reversals. Whilst not entirely implausible, we believe these risks to be far less threatening,” the investment bank added.   Philippine sovereign risk is supported by outsized improvement in the country’s foreign reserve adequacy, steady reduction in the sovereign debt burden and significant improvement in its composition, and expected but gradual uplift to the country’s medium-term growth prospects, it noted.   The country has strong external payments position with a record gross international reserves (GIR) level of $77.04 billion in January, according to ANZ.   “The pickup in reserves improves overall external creditworthiness. These improvements raise the sovereign’s ability to fulfill its external obligations fully and on time even amidst a range of plausible current and capital account shocks,” ANZ said.   “Barring unforeseen policy or political setbacks, we conclude that a near-term agency re-rating is more likely than a prolonged disconnect between the Philippines’ risk spreads and its sovereign rating,” ANZ noted. On a speculative note, ANZ said the level of Philippine debt its gradual pace of debt reduction may have tempered rating agency perceptions about credit improvements.   It said, however, the Philippines managed to trim its gross general government debt to 50 percent of GDP at the end of 2011 from 74 percent in 2004.   Fitch Ratings of London rates Philippine sovereign credit one notch below investment grade and Standard and Poor’s and Moody's Investor Service gave it two notches below investment grade. —VS, GMA News