PH seen getting rating upgrade from Japan firm

Japan’s Research & Investment Information Inc. (R&I) is set to give the Philippines another credit-rating upgrade, citing efforts to improve the peace-and-order situation in Mindanao as a key enabler to the growth in investments the country badly needs.

In a statement, R&I said it had revised its outlook for the Philippines to “positive” from “stable,” signaling an upgrade sometime within the next 12 months.

A country’s sovereign debt rating, which indicates the government’s capability to repay its obligations, is a proxy for the health of economy.

“The Philippines has started to show strong growth thanks to continued robust consumption driven by remittances from overseas Filipino workers (OFWs), coupled with expansions in public investment and exports,” R&I said.

R&I also cited the present administration’s efforts to restore peace in Mindanao. The firm said this would accelerate direct investment by foreign investors and bolster expectations for sustainable expansion.

“With the recent signing of the wealth sharing annex to the Framework Agreement on the Bangsamoro, we have come closer to enshrining perpetual inclusive growth in law for all Filipinos,” Finance Secretary Cesar V. Purisima said in a statement, reacting to the R&I move.

R&I said that if fundamentals for economic growth were solidified and steady increases in per-capita income became more promising, the firm would consider a rating upgrade for the country.

The country’s finances, a result of a crackdown on tax delinquents and the recent passing of higher excise taxes, have improved significantly, R&I said.

In a statement, Purisima welcomed R&I’s rating upgrade. But the firm added that there was still significant room for improvement. The 2012 figures showed that tax revenues were only 12–13 percent of gross domestic product (GDP).

“R&I positively views the government’s leadership in raising the sin tax levied on tobacco and alcohol beverages. Still, reform on the tax code and system aimed at a stronger tax collection capacity and better spending efficiency remains an important issue to be addressed,” R&I said.

Apart from the improvement in tax collections and peace talks in Mindanao, R&I also noted that the country’s inflation rate has been stable. Likewise, as a result of the sustained current account surplus, the level of foreign reserves has been rising.

“This has diminished concern about external liquidity. With the steady progress of fiscal consolidation, the government is now able to allocate more fiscal budgets, albeit gradually, to infrastructure projects and educational policies,” R&I said.