Moody’s: PH developments ‘credit positive’


Following the stellar performance of the Philippine economy in the first quarter of the year, Moody’s Investors Service said that developments in the country are “credit positive.”

In its latest credit outlook, Moody’s noted that, the Philippines, which was has a rating of Ba1 stable, recorded a 7.8-percent gross domestic product (GDP) in the first quarter of 2013, buoyed by private consumption and fixed capital formation.

“GDP growth in the Philippines is on an upward trend, in contrast to lackluster global growth performance,” Moody’s Senior Analyst Christian de Guzman said.

De Guzman also noted that the Philippines’ first-quarter real GDP growth is the strongest among all rated countries in the Asia-Pacific region, outpacing larger emerging markets such as China (Aa3 stable), which had 7.7-percent growth and Indonesia (Baa3 stable), which had 6-percent growth.

On a seasonally adjusted quarterly basis, growth was a robust 2.2 percent, higher than the previous three quarters, he added.

“Such healthy economic conditions will support revenue receipts and debt consolidation,” the analyst stated.

Meanwhile, de Guzman also cited the country’s developments in terms of fiscal surplus. He mentioned the government’s fiscal results for April showing a P36.8-billion surplus, the highest monthly surplus on record, which was largely the result of a 28.9-percent year-on-year increase in income tax receipts.

“The improvement in tax receipts demonstrates that the government’s efforts to bolster tax compliance are gaining traction and helping to boost revenue generation, one of the key weaknesses of the Philippines’ credit profile,” the analyst said.

Tax performance
De Guzman added that the relatively moderate year-to-date fiscal deficit also suggests a degree of spending restraint in the run-up to the midterm elections held last month and that, the government’s spending decisions are increasingly driven by long-term economic objectives rather than short-term political ones.

“President Benigno Aquino 3rd, in line with his campaign promise to not raise taxes, has largely kept the income tax regime intact since entering office in July 2010,” he stated.

Instead, the analyst noted that the Aquino administration has focused on improving tax compliance by stepping up enforcement and enhancing administrative procedures.

“As the government records a large proportion of income tax payments in April, the efficacy of these measures best reveals itself by comparing year-on-year trends for that particular month,” he added.

De Guzman cited the improvement in the tax collections of Bureau of Internal Revenue. In April, he noted that collection accelerated by 28.2 percent year-on-year, up from a 12.4 percent year-over-year rise in 2012.

“The Commission on Elections promulgates a ban on public disbursement in the weeks leading up to elections held in May every three years. Given its ambitious spending program, especially on infrastructure development, the Aquino government accelerated disbursements ahead of the ban, which took effect on 29 March,” the analyst also said.

With this, de Guzman explained that the government’s fiscal deficit consequently came in at P29.7 billion through the first four months of the year.

He also projected and the government is likely to meet its full-year fiscal deficit target of P238 billion, or 2 percent of GDP.

“The government thus largely honored the constraints imposed in order to provide for free and fair elections, while simultaneously maintaining fiscal discipline,” the analyst stated.


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