MANILA (Mabuhay) – The Philippines is on its way to become a $1-trillion economy by 2030, according to international analytics firm IHS Global Insight, saying it is only sovereign entity in Asia with improving credit prospects.
The country is presently following a trend of improving financial fundamentals, investor confidence, and governance standards, IHS Global, noted in the third quarter report “Sovereign Risk Review.”
The Colorado, USA-based analytics company, which also assigns its own credit rating, upgraded its Philippine outlook to “positive from stable.” The company’s reports are used as reference by other organizations as well as credit rating agencies, investment banks, and development institutions.
“The improved outlook means that the Philippines’ existing credit rating with IHS at the minimum investment grade of ‘BBB-‘ has a chance of being raised over the near term,” Bangko Sentral ng Pilipinas’ Investor Relations Office (IRO) said on Friday.
“… Apart from the clearly strengthened macro-financials over the last few years, the more recent upgrade to the Philippines’ outlook to positive in Q3 rested on improved governance standards and reforms enhancing competitiveness under the Aquino administration,” IHS Global noted.
The Philippines is the only sovereign in Asia that garnered a positive action from IHS.
“IHS recognized the Philippines’ comfortable liquidity as evidenced by sustained surpluses in its current account, as well as continually improving manageability of debt on the back of prudent fiscal management and growing economy,” the IRO said.
The Philippines’ current account posted a surplus of $4.7 billion in the first six months of 2015, largely fueled by remittances, revenues from the business process outsourcing industry, and tourism receipts.
The country’s current account has been in surplus for 12 consecutive years since 2003.
General government debt as a percentage of gross domestic product (GDP) is on a downward trend. As of end-June, the government debt-to-GDP stood at 36.2 percent, reflecting a steady decline from a peak of 68.1 percent in 2003.
“The Philippines has been on a long ratings upgrade trajectory over the last few years. The key driver to these upgrades has been successively strong current account surplus generation with newfound sources of export earnings other than workers’ remittances and lower energy import bills,” Jan Randolph, IHS director of sovereign risk, said in a statement.
Rajiv Biswas, IHS chief economist for Asia-Pacific, estimated that the Philippines, with a gross domestic product of about $292 billion, has the potential to become a $695-billion economy by 2025 and over $1 trillion by 2030.
“Two important growth drivers for the Philippines’ economy are the rapidly growing information technology-business process outsourcing (IT-BPO) sector and the strong flow of remittances from Filipino workers abroad,” Biswas said.
“The rapid growth of the IT-BPO industry is also creating positive transmission effects for the rest of the economy, including rapid growth in demand for commercial floor space, underpinning the development of existing and new office parks in urban centers,” he added.
IRO Executive Director Editha L. Martin said the favorable views of IHS on the Philippines would help further improve the way the rest of the world perceives the economy.
“Although the Philippines now enjoys investment grade sovereign credit ratings from a wide list of international debt-watchers, further building confidence on the economy is a never-ending task as we aim for sustainability of gains. The positive assessment of IHS on the Philippines is a welcome development,” Martin said. (MNS)