JAPANESE RATING AGENCY (R&I) UPGRADES RP CREDIT OUTLOOK TO STABLE
MANILA, JUNE 29, 2006 (MALAYA) BY MAX ESTAYO - Japanese rating agency R&I yesterday upgraded its credit outlook on the Philippines to stable from negative over the government’s success in fixing its finances.
The Tokyo-based rating firm kept its ‘BBB-’ rating on the country’s debts which is investment grade.
R & I said an upgrade is not far-fetched as long as it remains firm on its fiscal reforms.
The Japanese rating agency said falling deficit and foreign debt ratios will boost economic growth and help cap the impact of rise in global interest rates.
But it said it will "pay attention" to whether the country can provide an attractive investment environment for the growth sectors such as the business process outsourcing.
The rating firm said it will also keep tab of the impact of fiscal reforms in improving the country’s unstable political conditions.
The rating firm hailed the implementation of the reformed VAT despite strong public opposition.
The tax measure is expected to increase revenues by 1.3-1.4 percent of gross domestic product and should help government balance its deficit by 2008.
The lower deficit, R&I, said will put "interest payment under control" and improve the country’s defenses against interest-rate shocks.
R&I said the government should channel its resources for infrastructure development and creating employment.
It said the country has a sound production base for semiconductors and electronics, and holds promise in the BPO sector but said these must be supported by an "attractive investment environment."
R&I said the country’s external position is strong due to record-high remittances and the surplus in the current account balance.
It said "concern over foreign currency management is unlikely to surface for the foreseeable future" with the country’s strong reserves position.
The political climate has stabilized since the impeachment cases last year but R&I said it will keep a close look at the country’s political condition.
Both R&I and JCRA, another Japan-based rating firm, hold an investment grade credit rating for the Philippines.
JCRA has a ‘BBB’ rating for the Philippines but with a negative outlook
Japanese investors are among the biggest holders of Philippine debts in the region. About 20 percent of the country’s foreign debts are also denominated in Japanese yen.
Chief News Editor: Sol Jose Vanzi
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