Moody’s upgrades Phl outlook to ‘positive’

MANILA, Philippines –  New York-based Moody’s Investors Service upgraded yesterday the outlook on the Philippines’ foreign and local-currency bond ratings from “stable” to “positive,” a day after the government sold $1.25 billion worth of peso-denominated global bonds.

A “positive” outlook indicates that a rating is likely to be upgraded within the short term.

Moody’s currently rates the Philippines at “Ba3,” three notches below investment grade. An investment grade rating would lower the costs of borrowing and servicing debt for the country, and would also widen the pool of potential investors in its bonds.

Malacañang welcomed Moody’s decision to change the outlook on the country’s foreign and local-currency bond ratings from “stable” to “positive.”

“Moody’s action reflects the international markets’ recognition of the improving fiscal and monetary conditions in the country. It comes at a time when the outlook for many other economies is more cautious. The Aquino administration is encouraged by this development and is continuing its efforts to improve the environment for both portfolio and direct investments. We look forward to an actual ratings upgrade in the near future,” Presidential Communications Development and Strategic Planning Office Secretary Ricky Carandang said.

Moody’s cited a strengthening external payments position, well-anchored inflation expectations and improved prospects for economic reform as behind the outlook upgrade.

In November Standard & Poor’s raised the Philippines’ foreign currency rating to BB, two notches below investment grade. Fitch Ratings also rates the country two notches below investment grade.

After the change was announced, Finance Secretary Cesar Purisima said the development shows that Moody’s recognized the development in the country.

“There is no question on our ability or willingness to pay. We have always honored our debts. The Philippine economy has been growing positively for the past 47 quarters. The Philippines was growing even at a time when most of the first world went into crisis and that is strong proof that our credit story is strong,” Purisima said.

At the same time, Purisima said the government remain’s committed towards intensified revenue collection while maintaining fiscal discipline.

“We are strongly committed to fiscal sustainability and consolidation in the near-term,” he said.

For his part, National Treasurer Roberto Tan expressed hopes that a credit rating would follow.

“This is a welcome development. We are please with the improved outlook on our rating which takes cognizance of the strength of the country’s economic fundamentals. We hope that with this favorable outlook change, an upgrade is forthcoming in the new future,” Tan said.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said that Moody’s positive rating actions for the country is a clear vote of confidence in the government’s positive credit story.

“This is a clear vote of confidence in our positive credit story. With the Philippines’ strengthening credit profile and the resilience and strength that the Philippine economy continues to demonstrate in the face of a sluggish global economic recovery, we can expect brighter prospects ahead,” Tetangco said.

He pointed out that monetary authorities are committed to ensuring that future inflation remains consistent with the medium-term target while being supportive of sustainable economic growth.

“We will remain vigilant against emerging risks to the inflation outlook as we see to it that the Philippines continues to achieve higher levels of economic growth and at the same time ensure that prices remain stable as is BSP’s mandate. Also to this end the BSP will continue to pursue sound macroeconomic management and implement critical reforms to further improve the country’s external accounts and strengthen the country’s financial system,” the BSP chief added.

Better prospects

In upgrading the country’s outlook, Moody’s also took note of the country’s improved prospects for economic reform policies that would have positive effects on government finances, investor sentiment, and economic growth.

“Prospects for greater political stability following the unambiguous outcome of the May 2010 presidential elections has added further momentum to resilient economic growth by encouraging greater inflows of foreign direct investment and in boosting domestic consumer confidence,” de Guzman added.

Economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) see the country’s gross domestic product (GDP) expanding between 7.0 percent and 8.0 percent this year from a target range of 5.0 percent to 6.0 percent last year.

The Philippines posted a surprising GDP growth of 7.5 percent in the first three quarters of last year from 0.7 percent in the same period in 2009.

Moody’s also noted the country’s large debt stock amid the favorable fiscal developments under the Aquino administration. –Lawrence Agcaoili (The Philippine Star)