Officials at Bangko Sentral ng Pilipinas (BSP) are confident that recent policy rate adjustments will improve the country’s growth prospects in the medium term.
The central bank also said that the country’s growth potential prompted Standard & Poor’s (S&P) global ratings to affirm its investment rating at BBB+.
The recent decision by the Monetary Board to raise interest rates by 75 basis points increased the rate of the overnight repo facility in the Bills Settlement Payment System (BSP) to 5 per cent from 4.25 per cent.
BSP Governor Felipe Medalla said in a statement over the weekend that “BSP is sticking to its mandate of price stability by working to promote low and predictable inflation rates.”
“Well-managed inflation provides an environment conducive to strong and sustainable economic growth, as well as better living standards for all Filipinos,” Medalla said.
Central bank officials said that prolonged high inflation could have negative effects on spending and confidence and, in turn, on growth.
S&P indicated that the government’s fiscal position will gradually improve as the economic recovery takes hold. In their view, “the fiscal deficit should continue to narrow over the coming years as the economy regains its footing and the government winds down stimulus measures.”
International credit rating agency S&P affirmed the Philippines’ long-term investment grade credit rating of “BBB+” and the short-term rating of “A-2” with a stable outlook.
Meanwhile, the “stable” outlook reflects S&P’s forecast that “the Philippine economy will maintain healthy growth rates and its financial performance will improve significantly over the next 24 months.”
Furthermore, S&P said the Philippines’ offshore position remains an essential rating strength as “reserves continue to serve as a strong offshore buffer.”
The level of the country’s total international reserves rose to $94 billion at the end of October 2022 from $93 billion at the end of September 2022, which represents a more than adequate external liquidity stock equivalent to 7.5 months of imports of goods, services payments and initial payments. Revenues.
This exceeds the 3-month value of imports that the IMF proposes as a rule of thumb in reserve adequacy.
A sovereign investment grade rating indicates lower credit risk, allowing the country to access financing from development partners and international capital markets at a lower cost.
This enables a country to direct funds that would otherwise have been earmarked for interest payments to programs and projects of social benefit to its people.