SINGAPORE-based credit rating agency Moody’s Investors Service raised on Wednesday its outlook on the Philippines, making the country two notches away from its investment grade target.
In a statement, Moody’s announced that it raised the country’s foreign and local currency long-term bond ratings from Ba3 to Ba2 with stable outlook.
The credit rating agency noted the government’s “progress made in fiscal consolidation” as one of the “key drivers” that led to the upgrade, citing further the “small fiscal surplus” it achieved in the first four months of the year.
“The national government recorded a small fiscal surplus, building upon the notable turnaround in fiscal management seen during the [second half] of 2010,” Moody’s said.
“Much of the improvement has been attributed to expenditure restraint, but there is also evidence of an uptick in revenue generation,” it added.
For the first four months of the year, the government achieved a P61-million budget surplus after the April surplus of P26.258 billion reversed a deficit of P26.197 billion in the first quarter.
Moody’s said that the “sustained nature of macroeconomic stability” was also supported by “continued strength in the external payments positions.”
It cited the “fiscal restraint” demonstrated by the government, which “bolstered its policy credibility” and expressed confidence that such would be maintained for the rest of the year.
“The Philippines’ external payments position is strong in relation to its rating peers, and vulnerabilities related to a possible sudden stop of capital inflows are mitigated by its growing foreign exchange reserves,” the debt watcher said.
Gross international reserves hit a record high of P68.7 billion as of May, boosted by remittances from overseas Filipino workers.
Finance Secretary Cesar Purisima welcomed the ratings improvement, noting that the country secured its second credit rating upgrade less than a year since President Benigno Aquino 3rd took office.
“This is something we had been aiming for,” Purisima said, referring to the upgrade.
“We are very pleased with Moody’s recognition of the fiscal reforms [that] the Aquino administration has enacted and, more important, with their confidence in the future path of fiscal consolidation of the Philippines,” he added.
Budget and Management Secretary Florencio Abad also hailed the upgrade, saying that it “recognizes the reforms that the Aquino administration initiated, particularly in the areas of governance and fiscal management.”
“With the upgrade in credit ratings, the government can ensure better access to affordable financing and better loan terms for its critical development programs and projects,” he added.
In a text message sent to reporters, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said that with the improved ratings, he “will continue to pursue prudent monetary and banking policies and reforms to ensure the economy remains on the path toward sustained growth.”
According to Diwa Guinigundo, deputy central bank governor, the upgrade was well-deserved.
“The challenge now is to further work hard and build on these initial strides,” he said in a text message.
“We also need to ensure that growth drivers are entrenched to secure sustainability,” the message added.
“Policy reforms have to be pursued in key areas of the economy,” it said.
By Lailany P. Gomez and Katrina Mennen A. Valdez, The Manila Times
Follow us on: