What the BBB+ rating means

YES readers, it’s true. The Standard and Poor’s (S and ) rating at BBB+ is the highest ever credit rating the country has achieved.

The Philippines now has a higher credit rating than Indonesia and stands at the same rating as Thailand. Vietnam does not have a very good credit rating.

Along with Fitch ratings, S and P is acknowledged as the most credible set of ratings.

What does it mean anyway?

Credit ratings basically say that lending in the country, particularly to the government is easier and that repayment has lesser risk. It presupposes that government has a greater capacity to pay loans. With consistent 6% growth, and lowered inflation to the 3% level, the resulting upgrade comes as no surprise.

Other factors are new economic policies and reforms that increase our tax take, giving government the financial muscle to obtain good loans at better rates.

This can lead  to lower interest rates for important financing or allow our government to better negotiate loan terms. It also reflects the private sectors improved capacity to take on loans and pay them.

Politically speaking, it flies in the face of naysayers who believe that our rising budget deficits and increased borrowings will lead us to a “debt trap”.

If that were true, then ratings agencies would have downgraded us, rather than upgraded us. But they did not. They also did not listen to naysayers and their propaganda that likes to make false comparisons without studying if similarities do occur, as it is in the case of Sri Lanka.

It also means that three years of Dutertenomics are happy ones for the international finance community and for the economy in general.

It is a vote of confidence especially for Department of Finance Secretary Carlos Dominguez and the 10 point socio economic agenda set by them after the Sulong Pilipinas Conference in Davao in 2016.

It can also be construed as a vote of confidence for our foreign policy pivot to China, now acknowledged as the world’s largest economy. Strong linkages with China will be key to sustaining fast growth.

Likewise, this will boost lending and financing for private investments. Investment houses will now look at alternative areas for investment such as the Visayas and Mindanao.

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