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By Chino S. Leyco and Katrina Mennen A. Valdez, Reporters
Moody’s Investors Service, one of the three
key international credit-rating firms, upgraded its assessment of
the sovereign credit outlook on the Philippines to “positive”
from “stable” because of the country’s lessened dependence on
foreign loans.
The upgraded outlook was welcomed by the Bangko
Sentral ng Pilipinas and the Philippine Chamber of Commerce and
Industry (PCCI), the country’s largest business group, saying that
the upgrade gives positive signal to investors to finally pour in
more investments into the Philippines.
Tom Byrne, Moody’s senior vice-president, in a
statement said, “Improved macroeconomic conditions and fiscal
performance are mutually reinforcing each other. Low inflation has
anchored inflationary expectations, despite upward pressure from
high international food and oil prices.”
The ratings included in Moody’s assessment
were long-term government foreign and local-currency ratings,
foreign-currency bank deposit ceiling and foreign currency country
ceiling.
In a text message, Bangko Sentral Governor
Amando Tetangco Jr. said, “It is a further affirmation of the
progress the country has made in fiscal consolidation and improving
our external debt position. We are confident that as we maintain
stable macroeconomic fundamentals, inflation expectation will remain
well-anchored to afford us to sustain a low interest rate
environment.”
The outlook upgrade means that Moody’s is
likely to keep its current rating of below-investment grade on the
country in the succeeding six months to a year.
“We stated in February [2007] that a change in
the Philippines’ rating outlook to stable from negative would
depend on the achievement by the government of its 2006 fiscal
targets, coupled with prospects of further deficit reduction in 2007
and beyond,” Byrne said.
He added a stronger local currency and lower
interest rates have significantly lowered debt-service payments,
freeing budgetary resources for much-needed infrastructure spending,
which helps to resuscitate the long-languishing levels of investment
in the Philippines.
“The government has not masked inflation by
subsidizing retail petroleum prices, thereby avoiding contingent
fiscal liabilities and adding pressure on the balance of payments by
encouraging higher oil imports,” Byrne said.
He added the policy also avoids running into
political problems down the road, if subsidies were to become too
costly and needed to be rolled back.
Smaller budget deficits and the country’s
improved external payments position, Byrne added, have allowed the
government to prepay external public-sector debt and to shift
budgetary financing to depend less on foreign funding.
“We believe the government will continue to
face considerable challenges in sustaining progress in strengthening
its fiscal position, and deficit reduction may not be as readily
achievable as in the past several years,” he said.
He warned that “populist, political
maneuvering in Congress may water down the tax effort, and spending
pressures may increase well before the 2010 presidential
election.”
Despite the record budget surplus in the first
11 months of last year, Moody’s had earlier said the sustained
improvement of the Philippines’ fiscal performance remains a
concern for them.
Moody’s has reiterated that tax revenues, and
not privatization proceeds, will finance governments’ future
infrastructure projects and cut its debt levels.
The country is likely to end the year with a
budget deficit way below the ceiling set for the period, according
to the Department of Finance.
Finance data revealed the worst-case scenario is
for a fiscal gap of P15.1 billion, or much lower than the P63
billion programmed for 2007. This worst-case scenario will mean that
the deficit is kept at 0.2 percent of the economy, as measured by
the country’s gross domestic product (GDP). GDP refers to the
value of all goods and services produced within the country in a
year.
The same document showed the medium-case
scenario provides for a revenue shortfall of P9.1 billion, while the
best-case scenario would mean enjoying a P300 billion surplus at
end-2007.
Meanwhile, Samie Lim, president of the
Philippine Chamber, said the chamber members just held a meeting
immediately after the Moody’s announcement.
“All of [us] were very happy,” Lim said.
“This is a clear proof that the macro economic fundamentals of the
country is very strong and stable.”
The Philippine Chamber is a nonstock, nonprofit
and nongovernment organization of small, medium, and large
enterprises, local chambers, and industry associations representing
various sectors of business.
With Moody’s upgraded outlook, and strong
showing of other economic sectors, investments will be definitely
increase this year, Lim said, “particularly in [the] tourism and
mining sectors.”
Chamber officials recently met with a giant
Russian mining company planning to invest in the country. Mining is
on the rebound because of the soaring metal prices. The country is
naturally abundant with various minerals.
Lim said a $5-billion worth of investments in
tourism-related industries will also stream in this year, generating
almost one million jobs.
On infrastructure, Lim said the government is
keeping up with the demand, adding, “The newly opened Bacolod
Airport is one proof that the country is getting there.”
-- With AFP
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