Philippines earns another ratings upgrade
Moody’s Investor Service upgraded the Philippines’ sovereign ratings by a notch to Ba2 due to a “notable turnaround in fiscal management” by the government and signs of rising revenues.
The international debt watcher also pegged the outlook for the country’s foreign and local currency long-term bond ratings at “stable.”
The debt rating now stands at two notches below investment grade, on a par with ratings given by Fitch Ratings and Standard & Poor’s, with the latter upgrading the country last year.
The credit watcher said the decision to upgrade was based on the progress made in fiscal consolidation by the Aquino administration as well as the “sustained nature of macroeconomic stability, coupled with continued strength in the external payments position, against a background of a significant pick-up in the momentum for economic growth.”
Moody’s noted that over the first four months, Malacañang recorded a small budget surplus, building upon the notable turnaround in fiscal management seen during the first six months of the Aquino administration.
“Much of the improvement has been attributed to expenditure restraint, but there is also evidence of an uptick in revenue generation,” it said.
“While we expect expenditures to increase significantly in the second semester of 2011, as the government commences its cornerstone infrastructure investment program, the rise will not likely derail the trend toward fiscal consolidation,” it added.
Moody’s said that by demonstrating firm spending restraint, the government has bolstered its policy credibility and has improved prospects for reform.
The company noted, however, that the “continued uncertainty” over the implementation of structural measures to improve revenue generation justifies the stable outlook for now.
Moody’s also pointed out that, owing to continued prudence in macroeconomic management, solid growth momentum in the Philippines has not produced substantial overheating pressures, referring to the country’s inflation rate.
“However, headwinds stemming from softening growth prospects in the region have emerged, although these should be offset by a sustained improvement in domestic demand conditions,” it said.
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