Phl seen getting credit rating upgrade this yr

MANILA, Philippines - New York-based think-tank Global Source Partners believes that the Philippines would achieve another credit rating upgrade within the year on the back of the country’s strong macroeconomic fundamentals as well as improving fiscal position.

Global Source said in its latest quarterly report that positive developments including the rating outlook upgrade to positive from stable given by Standard & Poor’s to the Philippines would pave the way for the rating upgrade.

“We believe a change in credit ratings is likely within the year, though not yet to a lower medium grade rating,” the think- tank said.

S&P recently raised the credit rating outlook to positive from stable, paving the way for a possible upgrade of the rating that is currently two notches below investment grade within the next six months to 12 months.

London-based Fitch Ratings rates the country’s sovereign credit at one notch below investment grade while Moody’s Investors Service as well as S&P rate the country’s sovereign credit at two notches below investment grade.

“Only Fitch currently rates Philippine issues at one notch below investment grade. S&P and Moody’s are at two notches below. In any case, traders typically note that Philippine sovereigns have already been trading at investment grade levels, making a credit upgrade or change in outlook basically a catch-up move,” Global Source added.

Credit rating agencies, according to Global Source, are not convinced by the country’s accomplishments in the fiscal and external debt sectors.

“While rating agencies recognize the country’s high external liquidity and relatively steady growth, they claim to be still looking for improvements in the fiscal and debt profile, specifically in terms of a steeper downward tilt of the debt trajectory,” it said.

Based on its own computation, Global Source said the near-term reduction in the public-debt-to-gross domestic product (GDP) ratio would not be enough for the Philippines to attain levels approaching those of similarly-rated peers without a pronounced increase in sustainable revenue sources.

According to the think tank, the country’s tax effort has recently been whittled down by the implementation of several revenue-eroding laws and the enactment of much-needed revenue-generating legislation including the reform of tobacco and alcohol taxes and fiscal incentives rationalization are not likely to be passed in the near-term.