Moody’s hints at credit-rating upgrade soon
Moody’s Investors Services has expressed confidence that the Philippines would manage to further trim its debt burden this year and over the medium term, hinting again that it was poised to soon upgrade the country’s credit-rating.
In its latest report on the Philippines, Moody’s recognized efforts of the national government to improve efficiency of tax collection and to push for bills that would further help shore up state revenues.
Given this backdrop, the credit-rating firm said, there was a good chance the Philippines would continue to cut its debts as a proportion to the country’s gross domestic product.
The Philippines is rated two notches below investment grade by Moody’s, which assigns a “positive” outlook on the rating. Such an outlook indicates probability of an upgrade within the short term.
“We expect tax revenues to continue improving owing to administrative measures to further enhance compliance, and a legislative agenda that aims to increase certain excise taxes and reduce extraneous fiscal incentives for investment,” Moody’s said in the report.
“Moreover, the Philippines’s debt-to-GDP ratio will likely continue to decline in 2012 and beyond, demonstrating a more favorable debt trajectory than that of most of its rating peers,” the credit-rating firm also said.
The Philippine government’s debts, which stand close to P5 trillion, is about 55 percent of the country’s gross domestic product. The debt-to-GDP ratio has declined significantly from more than 70 percent in the early 2000s.
The country’s finance officials are hoping the ratio would go down closer to 50 percent to win the favor of credit-rating agencies.
Moody’s also cited debt management strategies of the government, saying these were helpful in the overall goal of reducing the country’s debt burden.
“Active debt management has also played a key role in fiscal and debt consolidation through cost savings. The Bureau of the Treasury has strategically engaged in debt buyback and exchanges over the past 18 months,” Moody’s said.
Under the bond exchanges that the treasury bureau had conducted, the government swapped about-to-mature bonds held by investors with freshly issued bonds in a bid to lengthen the average maturity of the government’s debts.
The credit-rating firm also said the Philippine government’s spending policy this year would help beef up growth of the economy.
The budget department has vowed to spur public spending this year after the lower-than-programmed expenditures last year partly caused the economy to grow slower than expected.
The latest comments from Moody’s followed a report released last week by Standard & Poor’s, which also signified its likelihood to upgrade the country’s rating.
