‘2016 polls to have minimal impact on Philippine credit rating’

MANILA, Philippines - The elections next year will have minimal impact on the country’s credit rating, Moody’s Investors Service said in a report.

Moody’s said the elections pose negligible risk to the country’s credit profile as the Aquino administration is largely stable.

“The next general elections will take place in May 2016, ushering in a new president. Stability under the presidency of Benigno Aquino III, who took office in June 2010, contrasts with the latter years of the two preceding administrations, which were fraught with political turmoil,” Moody’s said, referring to the administrations of Gloria Macapagal-Arroyo and Joseph Estrada.

The debt watcher said Arroyo’s term was dogged with calls for her impeachment due to allegations of electoral fraud, while Estrada was ousted from office in 2001 following mass protests and actual impeachment proceedings due to corruption allegations.

Moody’s noted that both Arroyo and Estrada faced charges of “economic plunder” following their departure from Malacañang.

It added Aquino’s second half approval ratings are high compared to those of previous presidents.

The international credit rater said it is unclear whether the country’s next chief executive would continue the reforms undertaken by the Aquino administration.

“The extent to which the next leader will institutionalize or reverse reforms conducted by the Aquino’s administration – especially positive changes related to fiscal management – is unclear,” it said.

“This uncertainty of policy continuity is amplified by the fact that presidents can only serve a single six-year term,” Moody’s pointed out.

Political risks are prevalent in democratic transitions such as those noted by Moody’s in Indonesia and India.

Aquino has endorsed former interior and local government secretary Manuel Roxas II as the administration candidate to compete against Vice President Jejomar Binay, Senators Grace Poe and Miriam Defensor-Santiago.

“As presidential campaigns in the Philippines have traditionally centered on personalities,rather than on policies or party affiliation, none of these candidates would represent an imminent departure from the Aquino administration in terms of economic policy,” Moody’s said.

It pointed out the absence of allegations of large-scale graft during the current government has set the bar higher for control of corruption, signaling continued political stability in the next administration.

“Political positioning ahead of next year’s elections has increased political noise and hampered – but not stopped – progress on reform,” the debt watcher added.

Moody’s also observes that effects of political events such as elections on a sovereign’s credit quality can vary based on institutional structure and strength, and buffers against event risk.

In several countries in the region, Moody’s sees a heightened likelihood that domestic events could impact sovereign political risk scores.

That could ultimately have a bearing on a country’s credit rating.

Moody’s upgraded the country’s credit rating to Baa2 or two notches above “junk” status last December on the back of the government’s reduced debt levels and the country’s robust economy.

Standard & Poor’s has assigned a credit rating of “BBB” or two notches above “junk” status while Fitch Ratings rates the country’s debt at “BBB-” or the first notch in investment grade ratings.