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'A-' sovereign credit rating achievable in 2 years, says BSP official

The Philippines getting another credit rating upgrade from S&P Global Ratings is achievable in the next two years amid the government push for fiscal reforms and heavy investments in infrastructure and social services, a top official of the central bank said Saturday.

"We expect at least an 'A-' in about two years," Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said during the Saturday news forum at Annabel's restaurant in Quezon City.

Under S&P's rating scale, an obligor rated "A" has "strong capacity to meet its financial commitments," but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.

The outlook for another credit rating upgrade came after the S&P Global Ratings raised its sovereign long-term credit rating for the Philippines to "BBB+," two  notches above the minimum investment grade. 

Prior to this, the Philippines was rated "BBB" or a notch above the minimum investment grade, since April 2018.

An obligor rated "BBB" has "adequate capacity to meet its financial commitments," but adverse economic conditions or changing circumstances are more likely to weaken its capacity to meet its financial commitments.

With the recent credit rating upgrade, Guinigundo said an "A-" rating is achievable in about two years as the country will sustain its policy and structural reforms.

"If we believe that these policies and structural reforms are good for us, good for our people because that will sustain economic growth that will result in higher employment opportunities and in effect poverty alleviation. Fine, let's pursue these policies and structural reforms," he said.

"These credit ratings agencies are out there, they are evaluating our performance. If they see that our performance shows sustained commitment to those policies and structural reforms then they give us an upgrade," he added.

For his part, Finance Assistant Secretary Tony Labino noted that the policy reforms under the Duterte administration are implemented well such as the Tax Reform for Acceleration and Inclusion (TRAIN) law.

According to the Department of Finance, revenue generated from TRAIN law exceeded target by 8.1 percent to P68.4 billion in 2018 from a goal of P63.3 billion. 

"It's above target... this will allow us to continue to make investments in infrastructure and social protection," Lambino said.

The TRAIN law, which took effect in 2018, reduced personal income taxes but at the same time increased excise taxes on sugar-sweetened beverages, petroleum products, and automobiles to offset for the potential revenue losses. —KG, GMA News