MANILA, Philippines - The Aquino administration hopes to get another credit rating upgrade, this time from Moody’s Investors Service, following the recent rating hike by Standard & Poor’s Rating Services.
Department of Finance (DOF) officials said different government teams have already concluded their meetings with Moody’s last week. “We’re hoping for an upgrade also from Moody’s,” said a Finance official.
The official said members of the Moody’s review team noted positive developments on the country’s external liquidity and efforts on the fiscal side.
At the same time, Moody’s also urged the Aquino administration to ensure that its efforts to improve revenues would be sustainable.
“They are asking if the efforts on the fiscal side would be sustainable without raising or slapping new taxes,” the DOF official said.
Moody’s noted the still high incidence of tax evasion and smuggling in the country.
Last week, S&P raised the Philippines’ debt rating marking the first rating upgrade for the Aquino administration, as the global credit watcher cited the country’s strong external liquidity, growth prospects and improving debt ratios.
The smooth presidential and national elections in May set the scene for improved political stability, S&P also said.
As such, S&P raised its foreign currency sovereign credit rating on the Philippines to BB from BB-. The outlook on the ratings is stable.
The one-notch rating upgrade brings the Philippines to two levels below investment grade, the same as Indonesia and Vietnam.
“We have upgraded the Philippines based on its steadily improving external liquidity profile and the underlying strengths of its external accounts, which increasingly mitigate the vulnerabilities posed by still high public and external debt, and provide buffer against adverse shifts in terms of trade or investor sentiment,” said S&P credit analyst Agost Benard.
The upgrade also reflects the progress achieved in debt reduction and the underlying fiscal consolidation, which brought public debt ratios in line with many of its ‘BB’ rated peers.
At the same time, S&P said the narrow revenue base and high incidence of tax evasion have been the principal contributing factors to weak public finances. This has resulted in still-high public debt, and severely depressed public investment for an extended period, it said.
S&P said the government has to improve its revenue measures for more long-term improvement.
The government is eyeing to keep the budget deficit ceiling at P325 billion this year. As of end-September, the state has already incurred a budget gap of P259.8 billion.