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| Photo Courtesy: HopeAndFail |
A report from ABS-CBNNews has confirmed that the Philippines got its first-ever investment grade debt rating today (Wednesday), as Fitch Ratings gave the country a 'BBB-' with a stable outlook.
"The Philippine economy has been resilient, expanding 6.6% in 2012 amid a weak global economic backdrop. Strong domestic demand drove this outturn," Fitch said.
Fitch, however, expects the PH economy to slow down to 5.5% this year, lower than government target growth of 6-7% growth.
The Philippines still awaits two other internationaly recognized credit ratings agencies' provision of investment grade ratings - one from Standard & Poor's and the other from Moody's Investors Service, which both rate the country a notch below investment grade.
S&P awarded the Philippines a BB+ with a positive outlook, while Moody's gave it a Ba1 with a positive outlook
What does investment grade mean?
There are many dimensions of the term investment grade. Investopedia defines investment-grade for a company as the following:
Investment grade refers to the quality of a company's credit. In order to be considered an investment grade issue, the company must be rated at 'BBB' or higher by Standard and Poor's or Moody's. Anything below this 'BBB' rating is considered non-investment grade. If the company or bond is rated 'BB' or lower it is known as junk grade, in which case the probability that the company will repay its issued debt is deemed to be speculative.
Investment grade, in the context of the country's ability to pay off its debts, means that the country is likely able to meet its obligations to creditor banks and other financial institutions. This means that the Philippines will be able to secure a spot in terms of financial investments (FDIs) and loan with relatively lower interests since there's no speculation it couldn't pay off its debts, as seen in the Aquino administration's continuous allotment of a big chunk of the government budget to paying off (bad) debts, in order for the country to settle its accounts and eventually be guaranteed access to more international funding due to its high reputation (investment grade).
Furthermore, financial dictionary defines investment grade as an indicator of a corporate bond's "creditworthiness and likelihood of default".
