More structural reforms expected: Moody’s sees dominance of admin senators as main driver

MANILA, Philippines - The dominance of senators allied with the administration in the next Congress should drive the enactment of more structural reforms that would eventually lift the Philippines’ credit rating, Moody’s Investors Service said.

“As the administration has likely secured victory for most of their senatorial slate of candidates — and a likely majority in the upper chamber — this may make it easier to tackle tough legislative reforms,” said Christian de Guzman, vice-president and senior analyst for the agency’s Sovereign Ratings Group.

Reforms, he told The STAR, “could sustain the country’s momentum and address key credit weakness.”

Moody’s, which rates the country Ba1 with a “positive” outlook, has refrained from raising the Philippines to investment-grade despite earlier actions from rivals Fitch Ratings and Standard & Poor’s Ratings Services.

The investment-grade status, which the government vowed to achieve this year, is seen as vital to lure more foreign investments, open more credit avenues, and lower debt interest payments to free up the budget for more public spending.

The Aquino administration, De Guzman said, should demonstrate its ability to deliver “actual results” once the 16th Congress begins session in July.

Of the 12 new senators, nine belong to the administration party Team PNoy, while three came from the United Nationalist Alliance. They will join 12 other legislators in the upper chamber who has a remaining three years in their term.

“The strength of Team PNoy’s mandate remains unclear” even after winning most of the seats last elections, he said in an e-mail.

De Guzman, a Filipino, said that based on history, congressional candidates do not necessarily adhere to their party’s principles once they have taken office. A “strong” majority, rather than a “simple” one, will be needed to gain a stronghold.

In its last rating action on May last year, Moody’s has cited the Philippines’ continued effort toward reducing the budget deficit and state debts. It however cited the need for more “structural reforms” to further boost revenue gains.