Manila: A move by an international credit rating agency to upgrade the country’s investment grade has drawn mixed reactions, with critics saying the adjustment will have little impact on the lives of ordinary Filipinos.

President Benigno Aquino III last Wednesday praised the Fitch Group’s adjustment of the Philippines’ investment grade status, with the palace hailing the upgrade as “an institutional affirmation of its good governance agenda”.

“The Fitch Group announced that they upgraded the status of the Philippines from BB+ to BBB-. This marks the first time in history that our nation has been granted investment grade status by a major credit ratings agency,” Aquino said in a statement.

The palace statement added that the Philippines has finally received the much-coveted investment grade status from Fitch Group, one of the three major international credit rating agencies that assesses the government’s ability to pay back its debt and the chance of non-payment.

“This means much more than lower interest rates on our debt and more investors buying our securities. Greater access to low-cost funds gives us more fiscal space to sustain and further improve on social protection, defence and economic stimulus, among others,” the President said.

No optimism

However, a local economic think-thank sees no reason to be optimistic that the upgrade will have an immediate impact on the lives of ordinary Filipinos.

IBON research group said the credit upgrade is “over-rated” as it has little impact on the actual state of development in the country. It said that credit rating agencies have an undeserved credibility. “Credit rating agencies also have a poor record of assessing debt and have even contributed to the recent global financial crisis,” IBON said.

IBON cited a list of errors committed by rating agencies in assessing the capability of certain countries to repay their debt.

“Their history of errors includes investment grade ratings for Thailand, Indonesia and Malaysia before the Asian financial crisis of 1997, investment grade ratings for US energy giant Enron before declaring bankruptcy in 2001, and investment grade ratings for collateralised debt obligations [CDOs] with sub-prime assets before the US sub-prime meltdown and global financial crisis in 2008,” it said.

IBON called on Filipinos not to be distracted by the Aquino government’s peddling of the administration’s achievements and experience for themselves if these “developments” are making an impact on their lives.

Reform in policies needed

“The government’s investment grade hype distracts from deeper economic problems. Without real reform in economic policies, the country’s problem of exclusionary growth will not be improved by the investment upgrade.

“The supposed lower borrowing costs for the government will not translate into improved health, education and housing for the majority of poor Filipinos under its privatisation thrust,” it said.

Aquino had said that the credit upgrade from Fitch “demonstrates the reclamation of our national pride. Truly, what was once known as the perennial laggard of Asia is taking off, and is accelerating towards its goal of an equitably progressive society.”

The country registered an economic growth of 6.6 per cent in 2012.