Palace puts positive spin on Moody’s credit rating downgrade

Malacañang sought to highlight yesterday the positive assessment given to the Bangko Sentral ng Pilipinas (BSP) to counter the downgrading of the Philippine credit rating by international credit ratings agency Moody’s Investor Services.

"Moody’s assessment cites our sound economic policy and reforms, the steadying hand of the central bank and the high quality of our labor force," Presidential Spokesman Ignacio Bunye said in a statement.

Bunye said the downgrading of the Philippines to a credit risk was mostly based on the same political reasons on the weakening of the peso vis-a-vis the dollar.

"It (Moody’s) forecast can be traced to the heady political atmosphere in the country, which must not be aggravated by excessive mudslinging, electioneering or doomsday scenarios," he said.

Bunye said President Arroyo has appealed to candidates in the May 10 elections not to add to market jitters by fanning the nervousness of investors and businessmen through black propaganda.

"We call on all the contending parties to focus on platforms and concrete plans," he said. "Our economy and confidence in it will benefit much from a prudent and responsible approach to the issues."

Presidential chief of staff Rigoberto Tiglao also took exception to Moody’s assessment that the Philippines has become a risk factor for investors.

"The central bank is doing everything," he said. "We can’t judge the market on the daily basis, but the CB has enough tools to stabilize the peso. The worst thing to do is to worry. And we’re confident that investors will see that President Arroyo has the platform to pursue economic reforms."

Meanwhile, presidential candidate Raul Roco challenged Malacañang yesterday to intensify the government’s revenue collection efforts to bridge the ballooning deficit, which has prompted Moody’s to downgrade the Philippine debt rating.

In a statement, Roco lamented that Moody’s cut the rating on the Philippine foreign currency long-term government debt from Ba1 to Ba2, and the rating on local currency obligations to Ba2 from Ba3.

Standard & Poor’s and Fitch have earlier downgraded their ratings on Philippines to similar non-investment grades.

Roco said government should improve its tax collection program that deteriorated to only about 12 percent of the gross domestic product last year from the previous 17 percent.

"If we can just go back to 17 percent, or four percentage point (higher) in tax collection efforts, we will have 160 billion pesos, and there goes your deficit," he said.

At the same time, Roco called on "zero tolerance" on corruption that has drained fiscal resources needed to fund education and other basic government services.

In its recent report, Moody’s noted that "concerns that the (Philippine) government’s recent progress in containing fiscal imbalances has not been sufficient to reduce vulnerability to shocks that might be transmitted between the budgetary and external accounts."

"The national government budget deficit for 2003 is well above the level originally programmed in 2002. It remains at relatively high levels, and the ratio of revenues to GDP also remains well below the peak reached back in 1997," the Moody’s report added.

Roco said the International Monetary Fund and the Asian Development Bank have earlier warned that the Philippines’ high level of public debt is unsustainable. Between December 2002 and October 2003, the level of public debt rose 13.4 percent to $72.8 billion, he said.

On Tuesday, Roco, a presidential candidate of the Alyansa ng Pag-Asa, "charmed and impressed" businessmen belonging to the umbrella organization Philippines, Inc. during a two-hour dialogue.

The former secretary of education was the third presidential contender to face members of Philippines, Inc., after action star Fernando Poe Jr. and Sen. Panfilo Lacson.

Roco told the businessmen that he is seeking the presidency because of "honor and glory," which every Filipino aspires for.

"All of us would want to be remembered for contributions to the honor of the Philippines," he said. "You can keep the money for those who aspire for money ... No nation has grown without a sense of humor, and that’s what we lack today. Many leaders have no sense of shame."

Roco said if he becomes president, he will implement "a truly 100 percent free public education" at the primary and secondary levels through more classrooms and textbooks. — Marichu Villanueva, Sammy Santos