(STAR) Buoyed by a burst of optimism from Bill Gates, business and government leaders attending the World Economic Forum were set Friday to hear more about the positive things they can do after two days of confronting fears.

The first two days of discussions in the five-day annual meeting of 2,500 leaders were devoted largely to what might be done to stave off recession and combat terrorism and conflict in global hot spots like Afghanistan, Pakistan and the Middle East.

Gates, the Microsoft chairman and co-founder, urged business to work with governments and nonprofit groups in a new kind of capitalism to stem global poverty and spur more technological innovation for those left behind.

“We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well. I like to call this idea creative capitalism,” he told a standing-room-only crowd.

“I am an optimist,” he said. “But I am an impatient optimist. The world is getting better, but it’s not getting better fast enough, and it’s not getting better for everyone.”

Gates is to reappear at Friday’s sessions, teaming once with British Prime Minister Gordon Brown and World Bank president Robert Zoellick to propose investments that “can generate the greatest impact on poverty reduction.” – AP

Moody’s upgrades RP ratings to ‘positive’ By Des Ferriols And Iris Gonzales Saturday, January 26, 2008

Moody’s Investors Service raised yesterday its outlook on Philippine ratings to “positive” from “stable” citing the government’s easing dependence on foreign borrowings.

“Improved macroeconomic conditions and fiscal performance are mutually reinforcing each other,” Moody’s senior vice president Tom Byrne said in a statement.

The ratings include those for long-term government foreign and local-currency, foreign-currency bank deposit ceiling, and foreign currency country ceiling.

Byrne said a stronger peso and lower domestic interest rates have significantly lowered debt service payments “freeing budgetary resources for much-needed infrastructure spending, which is helping to resuscitate the long-languishing levels of investment in the country’s economy.”

“The government has not masked inflation by subsidizing retail petroleum prices, thereby avoiding contingent fiscal liabilities and adding pressure on the balance of payments by encouraging higher oil imports,” Byrne said.

“This policy also avoids running into political problems down the road, if subsidies were to become too costly and needed to be rolled back,” he added.

He said smaller budget deficits and the country’s improved external payments position have allowed the government to prepay external public sector debt and to shift budgetary financing to depend less on foreign funding.

“We believe the government will continue to face considerable challenges in sustaining progress in strengthening its fiscal position, and deficit reduction may not be as readily achievable as in the past several years,” Byrne said.

“Populist, political maneuvering in Congress may water down the tax effort, and spending pressures may increase well before the 2010 presidential election,” he pointed out.

Moody’s outlook upgrade may pave the way for an actual credit ratings upgrade – the first since 2002 when the government began experiencing a fiscal crisis.

A credit rating upgrade may entail cheaper foreign borrowing as well as make the country more attractive to direct foreign investments.

“For the rating to move up, there will need to be continued commitment to fiscal consolidation, through a stronger revenue effort, expenditure restraint, or a combination of both,” Byrne said.

Byrne said reforms, including the restructuring of the power sector, are necessary to keep public finances on firmer ground. “Ultimately, debt ratios will need to be reduced from their current high levels and will need to move closer to levels consistent with Ba-rated countries,” he said. Ba rating is for foreign currency country ceiling.

Monetary officials welcomed Moody’s positive outlook, saying it was an affirmation of the country’s progress in fiscal consolidation and in improving its external debt position.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr said he is confident of a sustainable low interest rate environment as the government labors to keep macro-economic fundamentals stable. “We will remain committed to our reform agenda,” he said.

Despite the optimism, however, Byrne warned of negative credit implications if there is lapse in fiscal discipline or in the event of macroeconomic or political instability.

Byrne said these factors could lead to disruption in the government’s access to debt markets, or to renewed volatility in the exchange rate or interest rates.

Byrne, who headed the Moody’s team that visited the country earlier this month, also observed that the country’s low inflation had anchored inflationary expectations, despite upward pressure from high international food and oil prices.

The government’s fiscal position as of end-November stood at a surplus of P12.6 billion, buoyed by proceeds from privatization of government-owned assets.

Privatization proceeds reached an all time high of P90 billion also as of November last year.

In November 2006, Moody’s raised its sovereign credit outlook on the country to stable from negative.

Chief News Editor: Sol Jose Vanzi

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