S&P  HINTS  OF  RP  CREDIT  RATING  UPGRADE

MANILA, JANUARY 11, 2007
(STAR) By Des Ferriols - The Philippines could get an upgrade in outlook and credit rating if the success of fiscal and public reforms result in a decline in government debt and debt-service burden.

Standard & Poor’s Investor Service (S&P) said yesterday that the country’s outlook and credit rating would benefit if its reform program, including the privatization of the energy sector, could align the country with the debt-servicing burden and external leverage level of other countries in the ‘BB’ rating category.

"Conversely, if these processes lapse or become derailed by political imperatives or vested interests, the outlook could again come under downward pressure," S&P said.

S&P estimates that the government was able to reduce its fiscal deficit last year to 1.5 percent of gross domestic product (GDP) last year, a significant improvement over the 2.1-percent target.

S&P is upbeat over the country’s economic prospects for this year.

According to S&P, the increase in the value added tax rate had ensured economic stability, fiscal consolidation and eventual decline in the country’s total debt burden.

Economic resilience, according to S&P, supported the country’s current credit rating, combined with the country’s "relatively strong" external liquidity and the progress in the Arroyo administration’s fiscal consolidation program.

S&P assigned a ‘BB-’ senior unsecured debt rating to the country’s recent $1-billion global bond issue.

S&P credit analyst Agost Benard said the country’s debt ratios are improving and its external vulnerability is diminishing due to the overall drop in public sector borrowing requirements, a declining reliance on external funding, and a rising proportion of concessional versus commercial external borrowing.

"The ratings and stable outlook on the Philippines reflect better prospects for policy continuity and fiscal consolidation after last year’s full implementation of the expanded VAT law, along with a stabilizing political backdrop," said Benard.

"Current developments point to an increased likelihood that overall deficit reduction and fiscal rationalization will continue and deepen, even as some risks to political stability, administrative effectiveness, and policy implementation remain," Benard added.


Chief News Editor: Sol Jose Vanzi

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