PPP to boost RP credit rating - Citigroup

MANILA, Philippines - American banking giant Citigroup believes that the public private partnership (PPP) initiative of the Aquino administration would result in a sustained economic growth, paving the way for a much-awaited credit rating upgrade for the Philippines.

Citigroup economist Jun Trinidad said in a study that higher investments for major infrastructure projects would redound to investment-driven growth, elevated income and employment effects as well as stronger tax base for the National Government.

“It’s our view that investment-driven growth bodes well for fast-tracking fiscal consolidation and perhaps may be the missing piece in the country’s quest for an investment credit rating upgrade,” Trinidad said.

The Aquino administration is set to conduct a roadshow for projects under the PPP initiative next month wherein about P739.8 billion worth of infrastructure projects would be offered to private investors. About P127.8 billion worth of PPP projects would be undertaken next year while the remaining P612 billion would be scheduled from 2012 onwards.

“With the possibility of upside risk materializing, starting with the infrastructure summit, favorable investor responses and pledges, bidding and awarding of some of these projects, we expect positive PPP news flows to buoy up investor sentiment and lead to upgrades in macro forecasts and earnings outlook,” Trinidad added.

The National Economic and Development Authority (NEDA) now under Socioeconomic Planning secretary Cayetano Paderangga has laid down a Medium Term Public Investment Plan for 2009 to 2013 worth P3.1-trillion covering transport and airport projects that are essential in lowering logistical and production costs across the different regions and at the same time to boost economic growth and employment.

Trinidad said the PPP initiative could provide an upside risk for the investment bank’s GDP growth target of 5.4 percent next year.