Ratings agency Standard & Poor’s (S&P) has raised the Philippines sovereign credit rating from BBB- to BBB, making it fully in the ranks of investment-grade sovereign debt. Let’s look through those three B’s and look at the data behind their decision.
The Philippines has received yet another credit rating upgrade, from BBB- to BBB, nudging it further into investment-grade territory. What do these letters really mean, though? We can take a look at the data that S&P has provided in support of their decision in this main and supplementary article, to find out more.
Before we look at the data, let’s define sovereign credit ratings. These ratings are regularly provided by ratings agencies (that largest of which are S&P, Fitch, and Moody’s) on sovereign debt or government issued debt, as a measure of the ability of a certain government to repay debt. Because governments ability to pay is dependent on various risks - political risks can cause policy changes, economic risks can cause changes in tax revenue - these ratings are also used to assess the general economic environment in a country.
The numbers that we will look at are all based on S&P reports. Take note that the figures for 2013 are expected figures, and those for 2014 onwards are forecasts developed by S&P.
The first category of indicators that S&P uses in its assessment are economic and financial indicators that relate primarily to the internal economy and how it is able to generate and continue generating income and tax revenues.