Gov’t optimistic of rating upgrade

MANILA, Philippines - The Philippine government is optimistic  that the country could notch its first-ever investment grade rating this year, following last week’s meetings with debt watcher Fitch Ratings which they described as “very positive.”

“They were very cordial. They did not look misbelieving and the tone of the meetings was very positive,” Finance assistant secretary Ma. Teresa Habitan told The STAR in a phone interview.

Economic managers met with Andrew Colquhoun and Philip McNicholas, officials of Fitch Asia-Pacific Sovereigns, from Feb. 18 to 20 in a regular diligence visit of the credit rater to check on the creditworthiness of their client-countries.

Fitch rates the Philippines BB+, similar to Standard & Poor’s (S&P) Ratings Services, and equivalent to one notch below investment grade.

Another debt watcher, Moody’s Investors Service, also placed the Philippines one rung below at Ba1.

Outlook for the ratings is “stable” for Fitch and Moody’s, while S&P pegged it at “positive” last December, signaling an upgrade could be granted within the year.

The Aquino administration, which has enjoyed 11 positive credit rating actions since it took over in July 2010, targets reaching investment grade this year to further lower debt interest payments and attract foreign investments.

Claro Fernandez, investor relations chief at the Bangko Sentral ng Pilipinas, said Fitch meetings covered “updates in the economy” that included growth matters and topics concerning government budget and monetary policy.

“There is really no immediate action after the visit. They need to go to a committee first which would be the one to evaluate and come out with a report,” he said in a separate phone interview.

For fiscal policy, Habitan said Fitch asked “clarifications” on “administrative reforms” being undertaken by the Bureaus of Internal Revenue and Customs to improve revenue collections.

“Presumably, they will be giving feedback to the superiors, which are the Secretary of Finance and the central bank governor,” she pointed out.

In January, Fitch noted that public finances have now been a strong credit driver for the Philippines which had been mired under huge budget deficits years back. Among others, Fitch applauded the passage of an excise tax reform law which targets more revenues from tobacco and liquor products.

The budget deficit hit P235.3 billion last year, equivalent to 2.2 percent of economic output, preliminary data showed. The figure fell below the 2.6 percent target for the year as revenues improved 11.8 percent.

Aside from the improving state balance sheet, Fitch also took note of the strong external payments position characterized by balance of payment (BOP) surpluses and record-high foreign reserves.

BOP posted a surplus of $2.043 billion in January, BSP data showed, as monetary officials bought more dollars to temper the peso’s strength.