No change in RP rating outlook — Fitch

International ratings agency Fitch Ratings said it does not anticipate upgrading the stable outlook it gave the Philippines last February unless the government is able to address the weak revenue performance.

"We are not contemplating immediate change (in ratings)," James McCormack senior director for Fitch Ratings Asia Sovereign Group said during a meeting of the Philippine Economic Society yesterday.

"A positive outlook is not something we anticipate," McCormack said. "The debt ratio is still high."

The ratings company will have a "full review" of its classification of the Philippines in the first quarter, he said.

Fitch rates Philippine debt BB, two levels below investment grade. The firm raised its outlook in February to stable from negative. Moody’s Investors Service Inc., which rates the nation’s debt four levels below investment grade at B1, this month raised its outlook to stable.

According to McCormack, the government needs to address the medium-term fiscal issues.

He said the country is expected to do well next year but the condition is expected to worsen in the coming years unless a radical change is imposed.

PES past president and former Finance Undersecretary Romeo L. Bernardo agreed and said the country has great short-term performance but "very dim" medium-term outlook.

"We are like a terminally ill-patient who is having a good day," Bernardo said.

Moving forward, McCormack said the biggest challenge of the Philippines is its weak revenue performance.

"There is quite a sharp drop in terms of revenue and gross domestic product (GDP). The money simply isn’t there to spend," McCormack noted.

He added that the current capital spending cannot be sustained in the medium term. "Revenues have to shoot up."

For the month of September, the Bureau of Internal Revenue, the country’s main collecting agency, has failed to meet its collection target.

Despite this, McCormack said the country does not need to implement new taxes. Instead, tax collection must be improved.

For the country to upgrade its ratings, McCormack advised spending on infrastructure projects.

In order to address medium-term fiscal issues, McCormack said building infrastructures like roads and bridges will encourage both public and private investment.

"This (infrastructure investment) would stimulate growth overtime," he explained.

For the past 16 years, McCormack said the country is not investing. This practice has earned the Philippines the title of the country with the lowest GDP- to-investment ratio in Asia .

"This is quite a serious problem. The Philippines is slipping to a low medium term growth trajectory," McCormack said.