Purisima welcomes outlook upgrade by Japan agency

MANILA, Philippines - Finance Secretary Cesar Purisima welcomed the change in the outlook by the Japan Credit Rating Agency (JCRA) on the country’s foreign currency and local currency long-term ratings saying that this was a testament to the Aquino administration’s efforts to restore credibility in the Philippine government.

In a statement dated April 28, JCRA affirmed its BBB ratings on the Philippines’ foreign currency and local currency long-term senior debts and at the same time revised the outlook of the ratings to positive from stable.

“The revision of the rating outlook reflects the greater possibility that the Philippine economy will resume momentum for the improving trend of its fiscal position after it weathered the challenges of the world financial crisis rather successfully,” JCRA said.

This development, Purisima said, reflects improvements in the country’s economic landscape.

“(This is) an additional testament to the country’s macroeconomic and fiscal stability, and more importantly to the Aquino administration’s credibility and integrity,” the Finance chief said.

He said that JCRA’s outlook revision adds to the “vote of confidence” given to the Aquino administration by various credit debt watchers.

“There is an outpouring of vote of confidence in our economy from various credit rating agencies starting from the one-notch upgrade from S&P in November last year, the positive outlook from Moody’s in January this year, and now the positive outlook from JCRA,” Purisima said.

In its statement, JCRA said it would consider a credit rating upgrade if there is long-term political stability and economic growth.

“JCRA will consider a rating upgrade if and when the political stability is deemed firm and the economic growth and the fiscal improvement appear robust enough to sustain in the medium to long-term,” JCRA said.

It noted that on the political front, the current administration has a high support rate, with no political unrest often seen in the previous administration.

JCRA said it would keep a tight watch on President Aquino’s leadership and how he would enhance the country’s presence in Asia.

On the fiscal side, JCRA urged the government to widen the tax base to further boost revenues.

“(The) reduction of fiscal deficit should better be achieved by the increase in tax revenue through faster economic growth and the enlargement of the tax base. How the government will achieve it is to be watched,” JCRA said.

The Japan-based credit rating agency said it would closely monitor how the new government plans to achieve its goal to reduce the budget deficit to roughly P300 billion this year or 3.2 percent as a percentage of gross domestic product (GDP) and to cut the ratio gradually in the medium term of two percent by 2013.

Last year, the government’s budget gap hit P314.4 billion or 3.7 percent of GDP which was below the target of P325 billion for 2010.