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Credit watchdog upgrades outlook on Philippines

Standard & Poor’s has upgraded its outlook on the credit rating of the Philippines from “stable” to “positive,” further triggering expectations that the country will finally be rewarded an investment grade in 2013.

A positive outlook indicates that a country’s credit rating will likely be upgraded within the short term if existing favorable conditions continue.

S&P currently assigns the Philippines a rating of BB+, which is just a notch below investment grade.

The country’s economic officials are pitching for an investment grade, which they believe will help boost job-generating foreign direct investments (FDIs) that the country sorely lacks.

In a statement released Thursday, S&P said the decision to improve the outlook on the rating of the Philippines was based on the assessment of a favorable political situation in the country as evidenced by the ability of the Aquino administration to push for and implement vital reforms.

The announcement of the upgraded outlook came hours after President Aquino signed the Sin Tax Reform Act of 2012, which was 16 years in the making due to tough debates for and against it in Congress. In its first year of implementation alone, the law raising excise tax rates on cigarettes and alcohol is estimated to generate P34 billion in additional revenues for the government.

“We revised the outlook to positive to reflect our reappraisal of the political and institutional factors underlying the ratings,” Agost Benard, credit analyst of S&P for the Philippines, said in the statement.

“In our view, the current administration possesses a level of legitimacy, support and stability that reduces political uncertainty and allows for improved legislative efficiency. This conducive political setting enables the administration to focus on its key policy objectives of fiscal consolidation, increased infrastructure provision, and poverty reduction,” he added.

S&P said it may decide to raise the country’s credit rating to investment status next year if favorable indicators are sustained. These include improving revenue collection, declining reliance on borrowings from foreign creditors, and falling debt burden of the government.

The government’s outstanding debt is now estimated to be nearing 50 percent of the county’s gross domestic product (GDP) from a high of over 70 percent in the mid-2000s.

In a statement, Finance Secretary Cesar V. Purisima thanked the credit rating firm “for recognizing the continued improvement of the country’s fundamentals.”

With this action, he said, “we are now only half a step towards formally gaining investment grade, which the market has already given us by rating the Philippines at least two notches above investment grade.”—Michelle V. Remo and Ronnel Domingo

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Tags: outlook upgrade , Philippines , Ratings , Standard & Poor’s (S&P)

  • latino_boom

    Salamat naman at walang mga talangka dito

  • mojo76

    im just happy our country is doing a good job……….i will look forward in 2013 with the full trust and support  i have with this government……

  • PinoyDude

    Things that the government can do to improve our economy even further:

    1. Amend the 60/40 law on foreign investments. 

    2. Simplify the business registration process. If possible everything can be done online.

    3. Cut down red tape on opening a new business venture.

    4. The very expensive electricity rates for business should be looked into.

    5. Invest heavily on infrastructure—-well maintained roads, upgrade our rail system, a rapid bus system in major thoroughfares like EDSA.

    • BawalAngReklamador

      Also, KILL the CORRUPT.. NO second chance..

      • PinoyDude

        Hahah… kung pwede lang sana eh. Pero ayaw ni Lord yan.

        Vengeance is His alone ika nga.

        Maging matalino na lang tayo sa pagpili ng namumuno sa tin.

    • Hayek_sa_Maynila

      If I may add a few to your list:
      6. Slow down the peso’s appreciation/ allow more depreciation during crisis episodes (e.g. fiscal cliff uncertainty episodes in the US for 2013 can be as volatile as Greek exit episodes in 2011 and 2012 – BSP should not sell USD to temper depreciation). It must be consistent with its commitment to stay in the middle of the pack. In fact, PHP should be behind the pack like Indonesia this year, where ironically direct foreign investments are easily 10 times bigger than the PHL) for the simple reason that our Per-capita income is so far behind the region at $2,500/annum.
      Numbers from Bangko Sentral show that portfolio or footloose capital dominate surge in capital flows. Exports, remittances, BPO revenues, agri and mfg growth hav all been lackluster bec of strong peso. The economy can afford the boom in the stock market towards 6,000, (policy) interest rates drop to 3.0% or even lower…but it can ill afford peso strengthening (44 or lower). Otherwise our external position can deteriorate quickly and squander the gains the PHL has made so far.
      7. pass the fiscal incentives rationalization bill to plug the numerous loopholes in our tax system. Removal of incentives will make it clear where gov’t money really goes. Lots of PHL corpoations are able to unfairly avoid taxes bec of these expensive and ineffective incentives.
      8. help clean up Bureau of Customs by reducing number of/ tigthening regulation on free ports and filing mroe cases against “big fish” smugglers.

  • Diablo_III

    This administration passes very important laws that are pertinent to the nation’s success..

  • JC Lopez


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