Posted on December 20, 2012 10:15:39 PM
By Diane Claire J. Jiao, Senior Reporter
STANDARD & POOR’s (S&P) has raised the country’s credit rating outlook to positive from stable, recognizing the stability brought about by the Aquino administration.
"In our view, the current administration possesses a level of legitimacy, support and stability that reduces political uncertainty and allows for improved legislative efficiency."
The government has been able to focus on fiscal consolidation, infrastructure and poverty reduction, he noted. It has likewise displayed an improved capacity to pursue its reform agenda.
The Philippines has steadily moved up the S&P credit ratings ladder since the start of the Aquino administration. The latest move by the debt watcher raised the prospect of an investment grade score as early as next year.
S&P had stuck the country at BB- -- three notches below investment grade -- since 2005 but raised it one rung to BB in November 2010. The Philippines was awarded another upgrade last July to its current standing of BB+, one notch below investment grade.
Finance Secretary Cesar V. Purisima hailed the latest rating action, saying the Philippines moved "half a step" closer to investment grade.
"We thank S&P for recognizing the continued improvement of the country’s fundamentals ... This outlook upgrade is another example that good governance is good economics," Mr. Purisima said in an e-mail.
He said the Aquino administration was committed to continued reforms, after the "unprecedented events" this year which saw the "sin" tax and reproductive health bills passed into law and a preliminary peace deal agreed with the Moro Islamic Liberation Front.
The government, he added, has also successfully rolled out a number of public-private partnership deals, privatized Food Terminal, Inc. and notched healthy economic growth of 6.5% as of September -- well above the 5-6% target.
S&P reiterated its views on the Philippines’ credit rating, citing strengths like a robust external profile and consistent track record of moderately strong growth. These are offset, though, by low income levels and high, "albeit improving," debt and interest burdens.
"We may raise the ratings next year on an improved government revenue structure, a continued diminished reliance on foreign currency government debt financing, or a lower government debt burden," Mr. Benard said.
An upgrade can also be awarded if the Aquino administration’s reforms lead to an improved investment environment and growth capacity.
On the flipside, the outlook could be reverted back to "stable" if the Philippines fails to manage its fiscal deficit or its external liquidity position deteriorates, Mr. Benard warned.
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