Government moves to reverse S & P negative outlook

President Arroyo’s financial managers will move to reverse a negative outlook on the Philippines slapped by international credit rating agency Standard and Poor’s (S & P), top officials said yesterday.

A team from S & P will be in Manila starting today to begin a four-day annual review of the country’s creditworthiness and the government is confident that the Philippines will get an improved outlook from the New York-based agency.

"We will try to convince them that we have made significant progress and we merit an improvement in their outlook. We will tell them about our economic performance," Finance Secretary Jose Isidro Camacho said.

Recently, another New York-based credit rating agency Moody’s Investor Service upgraded the country’s credit rating outlook from negative to stable, citing the Arroyo administration’s efforts to consolidate its fiscal position while pushing economic growth.

Moody’s cited the Arroyo administration’s efforts to place the Philippines back on track toward fiscal soundness and sustainable growth.

Last year’s budgetary shortfall of P147.023 billion exceeded the programmed level of P145 billion but this was still within acceptable levels, Camacho said.

Moody’s said the government’s performance shows it is capable of further reducing this year’s budget deficit to the targeted level of 3.3 percent of GDP (gross domestic product) if its administrative reform efforts are intensified and economic growth remains relatively decent.

In last week’s forum of the Philippine Business Conference, policy makers said the country has had a positive start this year with the stock market soaring and is now among the best performing in the region this year. Its uptick signals the return of investor confidence which soured dramatically last year on political and security concerns.

Also, central bank data shows the country posted net portfolio inflows of $34.1 million in January this year, up from $17.1 million, last year.

"We want to tell them (S&P) that we will be able to sustain last year’s performance, especially with the economic environment looking better now even externally," Camacho, said.

He said strong expectations of an early recovery in the US economy and the strengthening of the European communities should boost government’s efforts to achieve its gross domestic product growth target of four to 4.5 percent this year.

Moreover, Philippine dollar bonds rallied last week, spurred by bullish sentiment over the confirmation of Camacho as finance secretary, as well as frenzied buying by dealers anticipating a further tightening of spreads.

The S & P team will be talking to the country’s economic managers as well as leaders of the business community such as Ayala Corp. chief executive officer Jaime Augusto Zobel de Ayala and business groups like the Bankers Association of the Philippines.

Part of S & P’s itinerary includes tours of several business and industrial zones such as the Gateway Park in Cavite and the Clark Special Economic Zone in Pampanga.

"This should give them a better feel of the mood of the business community and the higher level of confidence prevailing in the economic prospects of the country," said Camacho.

Aside from Moody’s, London-based international rating agency Fitch in January maintained a stable outlook on the country’s sovereign ratings.

On the other hand, Tokyo-based Japan Credit Rating Agency (JCRA) is seen to maintain its triple B rating and a stable outlook on the country’s sovereign ratings.

Last year, S & P retained its negative outlook on the country’s credit rating due to its mounting debt burden, poor economic prospects and deteriorating peace and order situation.