Moody’s upgrades Philippines, outlook stable

MANILA, Philippines (UDPATE) – Debt watcher Moody’s Investors Service has upgraded the Philippines’ sovereign rating, with a stable outlook, on the country’s improved fiscal position and sustained macroeconomic stability.

Moody’s said in a statement that it raised the Philippines’ Ba3 foreign and local currency long-term bond ratings by one notch to Ba2 from Ba3.

Ba2 is classified as non-investment grade speculative debt and still two notches below investment grade.

The Philippine government said the upgrade, which it described as long overdue, affirms its economic agenda, particularly efforts to trim the budget deficit.

“In the last 10 years, we have grown quite impressively, even through the crisis, inflation has been muted, the BOP (balance of payments) has been in surplus, the GIR (gross international reserve) level has climbed many folds, the banks have been strong and stable, fiscal consolidation has been entrenched. In fact, financial markets have already discounted this eventuality,” said Bangko Sentral ng Pilipinas governor Amando Tetangco.

Finance Secretary Cesar Purisima added: “We are now one step closer to our goal of attaining investment grade rating, which is crucial in further lowering our borrowing costs and attracting more FDIs (foreign direct investments).”

Economists agreed that the upgrade was well expected given fiscal improvements seen since the Aquino administration took office. But they noted a lot more needs to be done for the Philippines to reach investment grade.

Moody’s upgrade brings its rating in line with those of Fitch and Standard & Poor’s.

“To reach investment grade, the Philippines… still has to improve bureaucracy, corruption and other economic issues like tax ratio to make their state revenue sustainable. They need to improve infrastructure and tame inflation,” said Juniman of Bank International Indonesia.

“The upgrade was well anticipated and comes on the heels of the fiscal improvements we’ve seen,” noted Euben Paracuelles of Nomura, Singapore. “The next crucial step, apart from maintaining the intensity of tax administration measures, is to pass tax policy changes to boost revenues. This is more challenging but our view is that we are relatively optimistic the government will be able to maintain its focus.”

President Benigno Aquino, who won last year’s elections on an anti-corruption platform, vowed to prioritize narrowing down the budget deficit by plugging the holes in the tax system and adopting austerity measures.

In the first 4 months of 2011, his government recorded a budget surplus of P61 million as opposed to a deficit of P131.8 billion in the same period last year. –abs-cbnNEWS.com with a report from Reuters