On a scale of 1 to 6, with 6 being weakest, the Philippine sovereign’s institutional and economic standing is rated 4, according to the heat map reported by credit watcher Standard and Poor’s.
Manila’s foreign currency rating is an investment grade triple B plus (BBB+) and its sovereign outlook is stable, but its external sector is considered at its strongest under S&P’s latest readings.
The sovereign’s budget, last reported as a shortfall equal to 7.3 percent of local output measured as the gross domestic product (GDP) in 2022, is rated 3 although its debt burden is rated in worse shape at 4.
The country’s monetary sector is moderately rated at 3, comparable to neighboring Indonesia’s 3 rating but lower than Thailand’s monetary sector that S&P rated as 2.
S&P uses the banking industry country risk assessment (BICRA) methodology to assess financial institutions in terms of industry risk (5), institutional framework (high), credit risk (high), competitive dynamics (intermediate), and funding (intermediate).
The credit watcher said the Philippines, whose output growth averaged 6.6 percent the past five years, is forecast to expand no more than 5.8 percent this year and likely at this level next year.
The local economy already grew by 6.4 percent in the first three months no matter that the Bangko Sentral ng Pilipinas (BSP) engineered one of the more aggressive monetary policy tightening that emerging market economies began in the first six months of 2022.
The year-long tightening cycle culminated in the pause the BSP took at its last rate-setting meeting in May when its benchmark rate was set at 6.25 percent, confirming forecasts as headline inflation slowed for the fourth time to 6.1 in May.
The pause is seen to optimize the country’s growth potential this year given that credit growth showed some of the slowest expansions along India’s as a result of the BSP’s monetary policy stance.
“The Philippines and India have seen the sharpest slowdowns in credit growth, and the Bangko Sentral ng Pilipinas has hiked rates the most in the region. Indonesia, Malaysia, and Thailand have had modest credit growth. These three economies have also not seen steep inflationary pressures,” S&P said.
