"Political uncertainties, declining economic fundamentals and worsening regional economic conditions continue to place downward pressure on the outlook of the Philippines’ Ba1 foreign currency ceiling for bonds and notes and Ba2 ceiling for bank deposits," said Thomas Bryne, author of the Moody’s annual report on the Philippines.
Moody’s changed its Philippine outlook from stable to negative last October as the peso reeled in the wake of the jueteng payoff scandal that eventually led to the ouster of President Joseph Estrada.
Reacting to the Moody’s report, Bangko Sentral Governor Rafael Buenaventura yesterday expressed surprise and disappointment.
"There is no basis for that comment," Buenaventura said, adding the transfer of power from deposed President Estrada to President Macapagal-Arroyo "has been accepted."
Finance Secretary Alberto Romulo said yesterday the National Government will ask Moody’s to rethink its assessment of the Philippines.
Moody’s unfavorable assessment of the Philippine economy may, however, be a fluke instead of the trend. "They don’t necessarily work in tandem," Buenaventura said
Fitch, another international credit ratings agency, has already withdrawn the "rating watch negative" it has assigned to the Philippines.
Still another international credit ratings agency, Standard and Poor’s, is expected to change its Philippine outlook from negative to stable by next month.
Like Moody’s, S&P last year downgraded its outlook of the Philippines, pushing up the country’s borrowing rates and widening the spread of sovereign bonds traded in the global secondary market.
Paris-based investment bank, BNP Paribas, said earlier the country has strong chances of getting a credit ratings upgrade in the next three to six months.BNP Paribas, however, said a lot hinges on the Arroyo administration’s political will to put in place legislative reforms critical in encouraging investors to park their funds in the country.
In the Moody’s annual report, Bryne said the country’s macroeconomic performance faltered in the past years, reflecting a relatively large public sector debt and an "unfinished agenda for fiscal restructuring".
He noted gross domestic product growth is expected to remain below "non-inflationary potential" if there is no recovery in exports and continued favorable agricultural output.
"In Moody’s opinion, there is considerable uncertainty about whether there can be a durable bounce back in foreign investment, given the slowdown in the Asian economies, especially Japan’s, and the decline in American demand for electronics and other products in the Philippines," Bryne said.
While crediting the Philippines with an improved external payments position following the Asian crisis, Bryne warned against the "re-emergency of domestic political uncertainties or prolonged adverse external economic conditions that could place significant pressures on the balance of payments, complicating and challenging policy-making."