November 26 , 2013 - Marriott Hotel, Resorts World Manila, Pasay City, Philippines
It finally happened. On March 27 2013, Fitch Ratings delivered the much-anticipated rating upgrade for the Republic of the Philippines. It is now an investment grade-rated sovereign. The hard work has paid off.
The figures speak well for themselves. The Philippine economy was among the best performing in 2012, posting a growth rate of 6.6%, underpinned by strong domestic demand that bucked the weak external economic environment. The external balance has strengthened significantly since the early 2000 due to sustained current account surplus since 2003.
The net foreign exchange reserves have reached a record high of US$84 billion at the end of 2012, supporting further strengthening of the country’s external finances. Inflation is low and the outlook for 2013 and 2014 remains within the target range of Bangko Sentral ng Pilipinas of between 3% and 5%.
The rating upgrade, while it has already been priced in by the market, will bring benefits to the country as it will most likely bring down the cost of the government borrowing, which will eventually trickle down on the corporates and other borrowers as well. This will be a catalyst to renewed economic activity, thus fuelling further economic growth, which will help addressed the unemployment problem, to cite a few.
The Philippines’ new found status comes as President Benigno Aquino III nears the halfway mark of his six-year term. His administration has been the subject of a much greater scrutiny on what it has achieved so far. Is the country much better off today than it was three years ago? Is the administration delivering on its promises or is it a tale of broken promises? Are we finally on the verge of fulfilling our growth potential as a country with good economic fundamentals? The rating upgrade seems to answer all these questions.
Indeed, many are betting for a better Philippines – literally and figuratively speaking. The first of the four casinos slated to operate at the country’s Entertainment City complex has just opened it doors on what it promises to be a new gaming experience in the region. The government is counting on these new casino ventures to boost the tourist traffic and create jobs to help reduce the country’s unemployment rate, which is among the highest in Asia.
The Philippines has what it takes to become a tiger economy – it is just a matter of working together to achieve that common goal. But while the rating upgrade, as Fitch Ratings points out, reflects the strengthening of the country’s external finances, a strong policy-making framework, improvement in fiscal management leading to a sustained decline in public debt and enhanced economic growth prospects, long-standing structural weaknesses remain to be resolved – governance, infrastructure and business climate.
The Second Philippine Forum 2013, which will be held on November 26, 2013 at the Marriott Hotel, Resorts World, Manila will address those issues and other things that are needed to be done in order for us to progress beyond the investment grade rating status.
Copyright 2012 Corporate Governance Philippines. All rights reserved.