RP working to improve credit rating — GMA

President Arroyo said yesterday her government was working hard to "fix structural imbalances" amid a negative outlook by New York-based international credit rating agency Moody’s Investor Services.

"We just have to keep trying harder," Mrs Arroyo told a news conference, as she acknowledged that the country’s exports have weakened, but stressed this was linked to "what is happening in the international picture" referring to the weakening of demand from the US market, its main trading partner.

"So we have to cope with what is happening in the international picture and fix our structural imbalances," she said, adding that this included a gaping budget deficit.

Among others, she said the government would focus on areas where it has a competitive advantage, including its large educated labor force, and small and medium enterprises.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) said Moody’s negative outlook on the country’s creditworthiness will have little impact on government’s planned international borrowings in the second quarter.

The Department of Finance (DOF), for its part, has said it will formally ask Moody’s to reconsider its negative outlook.

While the negative outlook does not help in cleaning up the country’s standing among international creditors, BSP Governor Rafael Buenaventura said he is confident of a turnaround by the time government pushes through with plans to borrow money abroad.

"I am optimistic that when the Department of Finance goes to the market, the ratings will have changed while sentiment on emerging markets will be more favorable," Buenaventura said.

Already, there are talks the spreads on eight to 10 year bonds traded aboard went up by 10 basis points.

However, Buenaventura, who earlier expressed surprise and disappointment over Moody’s update on the Philippine economy, said the current weakness of Philippine bonds abroad is due largely to a jittery market wary over deteriorating economic conditions in Argentina and Turkey. The two countries are said to be contemplating a default on their loans with international lending windows.

One of the government agencies planning to raise funds abroad is the national Power Corp. which needs to borrow about $840 million to meet maturing obligations this year.

"Its so unfair, they are clearly misinformed," Finance Secretary Alberto Romulo said of Moody’s assessment that political instability is recurring in the country."

He said the government already established political stability, especially after the declaration of the Supreme Court and Congress that the Arroyo administration is legitimate. Moreover, Romulo said government performed well in the first quarter, citing the lower-than-programmed budget deficit.

Moody’s said in its annual report on the country that "political uncertainties, declining economic fundamentals, and worsening regional economic conditions continue to place downward pressure on the outlook for the Philippines’ Ba1 foreign currency ceiling for bonds and notes and Ba2 ceiling for bank deposits."

Moody’s said the country’s macroeconomic performance faltered in the several years, reflecting a relatively large public sector debt and an "unfinished agenda for fiscal restructuring."

Moody’s, changed the outlook for the country’s foreign currency country ceilings to negative from stable in October last year as the peso took unprecedented beatings following the jueteng payoff scandal that eventually threw Estrada out of office. – Rocel Felix