Despite higher ratings, PH still lags behind peers

THE PHILIPPINES remains behind many of its peers in terms of economic development, despite what the country’s current credit ratings may imply.

Debt watcher Fitch Ratings, which signaled its intention to upgrade the Philippines’ sovereign credit score, said there were more that need to be done to cement the country’s status as a reliable borrower.

In most measures, the Philippines still lags behind its peers, despite pronouncements by economic managers that the country deserves higher grades.

Filipinos still make much less money, on the average, compared to people in the countries rated at the same level as the Philippines. Government tax revenue, which underpins the country’s ability to repay loans, also remains below international norms.

Although it outperformed most of its Asia-Pacific neighbors, the Philippines is still uncompetitive due to governance issues and a hostile business climate, it said.

“Despite recent improvements, weak governance indicators remain a credit negative for the Philippines,” Fitch said this week.

Last month, Fitch revised its outlook for the Philippines’ sovereign debt score to “positive” from “stable.” This means Fitch will most likely grant an upgrade in the next 12 to 18 months. Fitch rates the Philippines at “BBB-,” its minimum “investment grade.”

The Philippines’ rating with Fitch is one notch behind grades given by Moody’s Investor Service, and Standard & Poor’s.

In a more detailed report following Fitch’s decision, the firm noted  that the country continued to score low on World Bank’s Ease of Doing Business Index compared with peers.

The Philippines scored in the 50th percentile against the “BBB” median of 72.4 as of end-2014.

Likewise, income levels in the country was still far the BBB average. At the end of 2014, the country had a gross domestic product (GDP) per capita of $2,836. This was far below the average $10,552 for countries with BBB ratings.

Revenues and grants as a share of GDP remain below the BBB median peers and are a credit constraint. The unconsolidated general government revenue as a share of GDP was 21.5 percent in 2014, compared with 28.6 percent for the BBB median.