S&P, Fitch sending review teams to RP

MANILA, Philippines - Representatives from international credit raters New York-based Standard & Poor’s as well as London-based Fitch Ratings are set to visit the Philippines next month to take a look at the country’s economic and fiscal developments, a ranking government official said over the weekend.

Finance Undersecretary Gil Beltran said S&P and Fitch are scheduled to dispatch review teams to the Philippines next month to talk to top officials of the Department of Finance (DOF), Department of Budget and Management (DBM), National Economic and Development Authority (NEDA), Bangko Sentral ng Pilipinas (BSP), among others.

“As usual they will review indicators reported by the DOF, NEDA, and DBM,” Beltran stressed.

The team of S&P headed by Agos Bernard is scheduled to arrive in the country on April 25 while that of Fitch is expected on April 20.

Beltran pointed out that discussions would likely center on economic as well as fiscal developments.

Economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) see the country’s domestic output as measured by the gross domestic product (GDP) expanding between 2.6 percent and 3.6 percent this year.

Due to the full impact of the global economic meltdown, the country’s GDP eased to 0.9 percent last year from 3.8 percent in 2008.

Fiscal authorities also expect the Philippines to get back on fiscal consolidation path by reducing the budget deficit to P293 billion this year from P298.5 billion last year as the Arroyo administration adopted a P330 billion Economic Resiliency Plan to cushion the impact of the global financial crisis.

The additional spending padded the deficit to a record level of P298.5 billion last year from only P68.1 billion in 2008. This eclipsed the previous record high of P210.7 billion booked in 2002.

The weak domestic economy also resulted in lower tax take as both the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) scrambled for much needed revenues.

“In the case of the DOF, they look at deficit as a percent of GDP. They will also take a look at both the deficit of the national government and the consolidated public sector, revenue effort, tax effort, debt service, and debt-to-GDP ratio,” he explained

Officials of S&P and Fitch are also expected to meet with BSP officials to discuss the country’s monetary policies with the impending recovery and the planned unwinding of monetary stimulus.

The central bank’s Monetary Board (MB) has kept its key policy rates at record lows but started phasing out liquidity enhancing measures as part of an exit strategy to veer away from its accommodative policy stance.

The body slashed key policy rates by 200 basis points between December of 2008 and July of 2009 and at the same time implemented a series of liquidity enhancing measures to cushion the impact of the worldwide fiscal crisis. This brought the overnight borrowing rate to a record low 4.0 percent and the overnight lending rate to 6.0 percent.

S&P, Fitch, and New York-based Moody’s Investors Service are closely watching the economic and fiscal developments in the Philippines.

Moody’s, who visited the Philippines early this year, has earlier upgraded the country’s credit rating outlook to positive while S&P and Fitch retained a stable outlook.

However, these agencies continued to rate the country’s sovereign bonds below investment grade with Moody’s and S&P currently rating Philippine debt at three notches below investment grade and Fitch Ratings at two below.