MANILA, Philippines – Finance Secretary Cesar Purisima expressed confidence that international credit rating firms will upgrade the Philippines soon amid the gains made in fiscal consolidation, sustained macroeconomic stability, and robust external payment position.
“I am confident that the credit agencies would catch up with their ratings sooner rather than later,” he told reporters during a briefing on Friday, March 23.
He noted that during a meeting with Standard & Poors (S&P), “RP (Philippines) is the most underrated country in the world.”
Debt watcher S&P upgraded the credit rating outlook of the Philippines to positive from stable in December 2011. This was followed by Moody’s, which upgraded the country’s credit rating outlook to positive from stable.
An improved credit rating for debt instruments issued by the Philippines translate to cheaper borrowing cost for the government, in turn allowing the government to allocate more resources for social services, education, military needs, among others.
Purisima cited as reasons for another round of upgrades the “improving” fiscal situation, “well-managed” macroeconomy, “and the governance agenda of President Aquino [that is] giving private investors more confidence.”
Budget deficit for 2011 reached only P197.8 billion, equivalent to 2% of its gross domestic product (GDP), lower than the programmed a P300 billion.
Credit rating agencies and other analysts and market participants usually watch the deficit reports to get guidance on whether new tax measures should be passed, new debt instruments would be issued, interest rates are raised or lowered, or whether the government could increase or temper spending for social services.
However, the lower-than-expected budget deficit in full year 2011 was largely due to the underspending by the Aquino government. Several infrastructure projects, including those that are part of the Public-Private Partnership (PPP) strategic scheme that the Aquino government has been touting as key engine of growth for the coming years, were delayed as basic governance efforts were pursued.
The underspending, coupled with weak global trade resulted in a slacker GDP growth of 3.7% in 2011 from 7.6% in 2010.
However, due to the financial and economic woes in richer countries, the eastward tilt of foreign funds have benefited the Philippine stock market. The main index has been hitting several record highs — 13 as of posting — for the year. – Rappler.com