BSP expects credit rating upgrades for Phl

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is looking forward to more upgrades for the Philippines from international credit rating agencies next year on the back of the improving fiscal position of the National Government under President Aquino.

BSP Deputy Gov. Diwa Guinigundo said rating agencies led by Moody’s Investors Service, Fitch Ratings, and Standard and Poor’s should take into consideration the country’s improving fiscal position brought about by prudent spending by the Aquino government as well as an improving tax collection.

“They (credit rating agencies) said the problem is the fiscal position but I guess the fiscal position is also showing significant improvements. So if we can sustain that this year and next year there will be no other reason for the other credit rating agencies not to grant us an upgrade,” Guinigundo told reporters.

The Aquino government has committed to trim the country’s budget deficit to two percent of gross domestic product (GDP) starting 2013 until 2016 from about 3.9 percent last year.

The Philippines is staring at a record budget deficit of P325 billion or 3.9 percent of GDP this year from the previous all time high of P298.5 billion or 3.9 percent of GDP last year due to the full impact of the global financial crisis as well as the debt crisis in Europe.

Fiscal authorities intend to trim the budget deficit to P290 billion or 3.2 percent of GDP next year.

He pointed out that credit rating agencies should recognize the ability of the Philippine government to survive the global financial crisis as well as the debt crisis in Europe.

“It’s a recognition of the improvements that we have shown in the last few years even through the global financial crisis,” he added.

The Philippines was forced to abandon its commitment to accelerate the achievement of a balanced budget to 2008 through a series of fiscal reforms implemented by former President Gloria Macapagal-Arroyo as well as the original 2010 schedule under the Medium Term Philippine Development Plan (MTPDP) due to the financial crisis that started in the US.

The fiscal reforms undertakend by the Arroyo administration helped trim the budget deficit to P68.1 billion or 0.9 percent GDP from a high of P210.7 billion or 5.5 percent of GDP booked in 2002.

Monetary authorities are hoping that the Philippines would get another credit rating upgrade from New York-based Moody’s after getting a sovereign credit rating upgrade from S&P last Nov. 12.

S&P raised the credit rating for the government’s long-term, foreign currency-denominated debt issuances by a notch, or from three to two notches below investment grade. It cited the country’s rising external liquidity, explaining that growing reserves of foreign currencies improves the government’s ability to service its liabilities to foreign creditors and investors.

BSP Governor Amando Tetangco Jr. earlier said in an interview with reporters that the country deserves to a credit rating outlook from Moody’s after successfully surviving the onslaught of the global economic meltdown as well as financial crisis.

“We are hopeful that Moody’s, for instance, will improve the rating, at least on the outlook, because there’s been significant amount of progress on various areas. The market has really gone ahead of the ratings agencies, there needs to be a catch up there,” Tetangco said.

Moody’s, S&P, and London-based Fitch Ratings are closely watching the economic and fiscal developments in the Philippines.

Moody’s upgraded the country’s credit rating outlook to positive from stable as early as 2008. A positive outlook means there is possibility for a credit rating upgrade in the short term while a stable outlook means no change is anticipated.

However, Moody’s has yet to upgrade the country’s sovereign credit rating that is currently pegged at three notches below investment grade. S&P and Fitch, on the other hand, rate Philippine debt at two notches below investment grade with a stable outlook.

For its part, Singapore-based DBS Bank Ltd. believes that the Philippines faces more upgrades from international credit rating agencies on the back of its improving macroeconomic and fiscal fundamentals.

“Looking ahead, the door for more ratings upgrade should be opened if the Philippines succeeds in maintaining its post-crisis positive momentum,” DBS stated in the report.