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Bacolod City, Philippines Friday, September 23, 2016
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Stability and predictability

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The latest assessment of S&P Global Ratings kept the Philippines' credit rating a notch above investment grade with a “stable” outlook, affirming the long term credit rating of “BBB” and short term credit rating of ‘A-2'.

The rating agency explained the stable outlook balances the country's lower middle-income economy and diminished policy stability, predictability, and accountability against its strong external position, which features rising foreign exchange reserves and low and declining external debt.

It also revealed that a higher rating is unlikely over their two-year ratings horizon. They did say they may raise ratings if continued fiscal improvements under the new administration boost investment and economic growth prospects, or if improvements in the police environment lead them to better assessment of institutional and governance effectiveness.

On the other hand, S&P could also downgrade the country's credit ratings if the reform agenda stalls or if there is a reversal of the recent gains in its fiscal or external positions under the new administration.

It also noted that President Duterte's strong focus on improving “law and order” which has allegedly resulted in numerous instances of extrajudicial killings since he came into power could undermine the respect for the rule of law and human rights and challenge the legitimacy of the judiciary, media, and other democratic institutions.

They have also noticed the Presidential tirades made against US President Barack Obama, UN secretary Ban Ki-moon, and the recent F-bomb against the European Union for allegedly meddling in the country's affairs. “When combined with the President's policy pronouncements elsewhere on foreign policy and national security, we believe that the stability and predictability of policy making has diminished somewhat,” S&P said.

The goal of companies like S&P is to provide high-quality market intelligence in the form of credit ratings and research. The only reason they care whether a country is going on the rise or down the drain is so they can properly advise their clients where to put their money. The Philippines' macroeconomic stability, sound policies, and acceptable performance have so far kept our investment grade intact but that is a rating we could very easily lose once those unbiased technocrats decide that the risks start to outweigh the benefits.

It took decades for our economy to be rated as investment grade. President Duterte's advisers might want to remind him how the unrestrained use of uncouth and uncalled for language at the slightest provocation towards our allies, trading partners, and potential investors in the international community could affect the perception of stability and predictability that those people are counting on to make important decisions as far as our country is concerned.*


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