"We have been through the same situation before and we have recovered. We believe we can withstand these questions of confidence," Press Secretary Ignacio Bunye said.
Bunye said the two things that pulled down the country’s rating were the political uncertainty and the Supreme Court’s temporary restraining order that blocking implementation of the EVAT, a cornerstone of the Arroyo administration’s economic program.
"We believe the situation is starting to ease up and the early action of the Supreme Court will turn around the perception," he said.
The SC has scheduled oral arguments on the EVAT suspension for July 14.
"Our determination to win the legal battle on the implementation of the VAT and our focus in putting our fiscal house in order will be our strong points in eventually regaining the positive outlook of the international business community," Bunye said.
Fitch and S&P cut the Philippines’ rating from stable to negative.
Bunye said the restraining order on the VAT was a temporary setback and welcomed an earlier pronouncement by the SC that it would resolve a petition filed by opposition lawmakers questioning the tax law’s legality within 30 days.
Bunye said the decision by Fitch and S&P was "unfortunate" but stressed that the delay in the VAT’s implementation will not derail the government’s fiscal targets this year.
"The Arroyo administration remains steadfast in pursuing its commitments to institute the reform programs."
Bunye said the expanded tax is President Arroyo’s flagship measure to put the country’s fiscal house in order and noted she had worked hard to see it passed by Congress.
He denied claims by resigned finance secretary Cesar Purisima that Mrs. Arroyo had sought to delay its implementation.
Purisima said Mrs. Arroyo mentioned her desire to delay the VAT’s implementation because it would hurt her presidency at a time when she was battling allegations that she cheated in last year’s presidential elections and that her husband, son and brother-in-law had received payoffs from illegal gambling barons.
"The President is committed to this very important fiscal measure. The earlier this is resolved, the better for us," Bunye maintained. "Government lawyers are asking the Supreme Court to lift the TRO, and that position stays."
Mrs. Arroyo will not hesitate to raise the VAT from the current 10 percent to 12 percent once the authority granted her by the tax law is cleared by the court, Bunye continued.
Opposition lawmakers have questioned this provision in the law, contending that only Congress has the power to tax.
Presidential Management Staff chief Rigoberto Tiglao said if Mrs. Arroyo had wanted to delay the VAT, the volatile local oil prices would have been the most likely reason and not the political crisis.
"The past few days oil prices were hitting $60 a barrel and the VAT comes in almost at the same time. Any economic planner, any leader would… try to think of ways to delay the factor that you can control like the VAT," he said.
"But apparently when the issues are really studied, there was no legal way, really, to postpone the impact of the VAT on petroleum prices."
Tiglao added the allegations that Mrs. Arroyo had a hand in the Supreme Court’s restraining order were a "big insult" to the High Tribunal: "You cannot really convince or push the Supreme Court."
James McCormack, Fitch Ratings head of Asia sovereign ratings in Hong Kong, said the company would cut its ratings further should the Supreme Court rule the EVAT to be unconstitutional.
Prolonged political uncertainty could also trigger a downgrade.
An anti-Arroyo group, the Freedom From Debt Coalition, said the Arroyo administration is to blame for the credit rating downgrades.
"What is good for business is not necessarily good for the people, particularly the poor. Their outlook downgrades reflect the failure of Mrs. Arroyo’s administration in managing the affairs of the country," said FDC president Ana Marie Nemenzo. — With Katherine Adraneda