S&P upgrades PH credit rating outlook

Rappler.com

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International credit rating agency Standard & Poor's (S&P) revised the credit rating outlook on the Philippines to 'positive' from 'stable,' citing the country's moderately strong growth and the Aquino government's 'improved capacity to pursue its reform agenda'

MANILA, Philippines (UPDATED) – International debt watcher Standard & Poor’s (S&P) revised its credit rating outlook on the Philippines to “positive” from “stable,” raising the possibility the country will get an investment grade status as early as 2013.

Citing the country’s moderately strong growth and the Aquino government’s “improved capacity to pursue its reform agenda,” S&P affirmed the Philippines’ BB+ long-term, and B short-term sovereign ratings.

The ratings place Philippine bonds just a notch below investment grade.

“We revised the outlook to positive to reflect our reappraisal of the political and institutional factors underlying the ratings. In our view, the current administration, which took office in June 2010, possesses a level of legitimacy, support, and stability that reduces political uncertainty and allows for improved legislative efficiency,” S&P said in a statement.

“This conducive political setting enables the administration to focus on its key policy objectives of fiscal consolidation, increased infrastructure provision, and poverty reduction,” it added.

Finance Secretary Cesar Purisima welcomed S&P’s move, saying that with it, “we are now only half a step towards formally gaining investment grade.”

“This is another example that good governance is good economics,” he said.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. also welcomed the development and vowed to support the country’s institutional framework by ensuring macroeconomic fundamentals are sound.

“We will also continue to fortify our financial inclusion, financial education, and consumer protection efforts. These will create the base for truly inclusive economic growth,” he said.

The improved outlook comes on the heels of President Benigno Aquino III’s signing of a historic bill reforming sin taxes or taxes imposed on tobacco and alcohol products.

The new law will raise for government additional revenues amounting to roughly P34 billion in the first year of implementation.

The revenues will be spent primarily for the Aquino government’s universal health care program, which aims to provide poor families with insurance.

Further improvement in credit ratings will translate to lower borrowing costs for the Philippines, which taps global debt markets for funds to plug its budget gap.

Better ratings will also result in increased investments in the capital markets and job-generating manufacturing and service sectors. Investors also take rating upgrades as sign that the country’s prospects are bright.

S&P said its next credit action depends on the government’s ability to improve its revenue structure, manage its fiscal health amid external challenges, and pursue institutional and structural reforms to improved the investment environment. – Rappler.com

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