PH seen getting another upgrade

Debt watcher Moody’s Investor Service, the only rating firm that still considers the Philippines as junk, has hinted at a possible upgrade for the country following the country’s better-than-expected first quarter economic growth.

In a statement on Monday, Moody’s also noted the government’s improved tax collection effort and the recent mid-term elections, where the Aquino administration won a rare majority in both houses of Congress, as “credit positive” developments.

“GDP (gross domestic product) growth in the Philippines is on an upward trend, in contrast to lackluster global growth performance,” Moody’s said.

“On a year-on-year basis, the Philippines’ first-quarter real GDP growth is the strongest among all rated countries in the Asia-Pacific region, outpacing larger emerging markets such as China,” it added.

Moody’s currently rates the Philippines at one notch below investment grade. The firms’ peers, Fitch Ratings and Standard & Poor’s, upgraded the country to investment grade earlier this year.

“Such healthy economic conditions will support revenue receipts and debt consolidation,” Moody’s said.

On a seasonally adjusted quarterly basis, the Philippine economy expanded 2.2 percent, higher than the previous three quarters.

Last October, when Moody’s upgraded the Philippines to its current rating, the firm noted that the passage of effective structural reforms, higher GDP growth, and the continued improvement in the country’s fiscal performance would lead to another upgrade.

Moody’s cited the recent improvement in the country’s tax receipts, as shown by the P36.8-billion budget surplus for April—the highest monthly surplus on record.

The firm noted that that this improvement was a result of better enforcement and enhancement of administrative procedures, not raising income taxes.

“As the government records a large proportion of income tax payments in April, the efficacy of these measures best reveals itself by comparing year-on-year trends for that particular month,” Moody’s said.

The Bureau of Internal Revenue (BIR) recorded a marked improvement in performance, with April receipts accelerating by 28.2 percent year on year, up from a 12.4 percent year-over-year rise in 2012.

Moody’s also expressed hope that the government would be able to pass vital reforms with ease following the administration’s recent election success. Candidates under the Aquino administration’s multi-party coalition ticket won nine of the 12 Senate seats that were contested last May.

“Given this strong mandate, the prospects for further fiscal reforms over the next three years have improved. In particular, legislation related to the mining sector and the rationalization of fiscal incentives could provide a greater boost to government revenue,” Moody’s said. Paolo G. Montecillo