Fitch set to evaluate RP creditworthiness

London-based international rating agency, Fitch IBCA, Duff & Phelps will evaluate the Philippines next week and the government is hoping for an upgrade in sovereign rating in the light of the improved peace and order situation and economic outlook.

Fitch is sending representatives to Manila on March 22-25 to hold discussions with the administration’s economic managers as well as business leaders for its annual review of the country’s creditworthiness.

Finance Secretary Jose Isidro Camacho said the government was hoping for another upgrade of Fitch’s sovereign rating last placed at "stable" when the agency last rated the Philippines in January. "We’re always looking to upgrade their evaluation," Camacho said.

Since January, leading indicators show that the economic outlook at least for the first six months of the year was better than originally expected, with the gross domestic product projected to be between 3.8 and 4.3 percent.

Fitch gave the Philippines a negative rating during the last days of the Estrada administration but it was also the first international rating agency to upgrade this back to "stable" in January 2001.

Earlier this month, Standard & Poor’s (S & P) sent a fact-finding team to the country for its annual review and the agency raised concerns about the Arroyo administration’s capability to sustain its economic gains.

Camacho said S & P questioned whether the government had what it took to continue pushing for the policy reforms that contributed to last year’s impressive performance amid the slowing global economy.

"Basically, they wanted assurance that the government will be consistent in its application of policies that are needed to continue what we have achieved last year and demonstrate or exhibit that we will be doing these," Camacho said.

In its January 2002 rating, Fitch noted the country’s "remarkable resilience to external development" as well as the encouraging progress on structural reforms and the comfortable international liquidity position.

The agency, however, warned that a protracted downturn in the US would put the Philippines’ ratings under pressure, especially in the absence of an appropriate policy response.

Fitch said continuing high levels of public and external debt leave government with little room for maneuver, and 2002 marks the beginning of a medium-term deficit and debt reduction program.

Fitch added that at this stage, government’s projected demands on international capital markets for this year at $2.8 billion, looks modest compared with other countries with BB+BB credit like Mexico, Colombia and India.

S & P has not released its rating for 2002 but in 2001, the agency retained its negative outlook on the country’s credit standing due to its increasing debt burden, poor economic prospects and deteriorating peace and order conditions.

But the Department of Finance expressed confidence that government’s recent success in the issuance of a $1-billion global bond will bolster its chances of getting an upgrade in its credit rating outlook.

"It there is one thing that is out of the equation now, it is the concern of how we are going to meet our foreign borrowing requirements this year. The bond issue takes away one of the risk factors that the S & P could consider," Camacho said earlier.