CEBU, Philippines - After the country bagged its first-ever BBB- investment grade rating last Wednesday, business leaders of small and medium enterprises (SMEs) and retailers forecasted a bullish future for the Philippines and suggested recommendations on ensuring how such economic gains trickle down to the masses.
Just a day before Holy Thursday, New York-based Fitch surprisingly raised the Philippines’ credit rating to BBB- from BB+, with a stable outlook citing resilient economic growth, stable inflation, healthy external payments position and improved fiscal reforms.
After Fitch’s announcement, the Philippine Stock Exchange index (PSEi) hit 182.35 points or 2.34 percent to close at a new record of 6,847.47 that day.
The Aquino government has enjoyed 11 positive credit rating actions before Wednesday’s upgrade.
Fitch was the first credit-rating agency to grant such upgrade while the country still remains one notch below the coveted status for Moody’s Investors Service and Standard & Poor’s (S&P) Ratings Service.
Robert Go, director of Philippine Retailers Association – Cebu Chapter, considered the investment upgrade as the “best news†for the country.
He projected the stocks to go sky high, currency to get stronger, GDP to post higher growth for the first quarter of the year, and a deluge of investments to come from the United States, Europe and other Asian countries.
He added there will be more money circulating in the system as big companies will be encouraged to invest more in real goods, buildings and expansion programs while interest rates may decline further and higher investment portfolio shall overflow.
With greater business confidence, he said more buildings are expected to rise in Cebu’s skyline particularly for commercial, retail, residential, condominiums, luxury resorts, hotels and other tourism-related infrastructure.
He added local government units in towns and provinces should work on improving themselves and initiate strategies that would boost their tourism industry and business friendliness to encourage more investments in the countryside, thus attaining inclusive growth.
“Countryside development can bring employment in the grassroots level with the education and trainings provided. Poverty is a phenomenon in the mountain barangays and countryside areas since hunger is experienced in the provinces,†he said.
According to Go, the poorest of the poor should be improved and poverty alleviation should be more of a teacher of men, teaching them to fish and not to give the fish.
Go said in newly-developed countries, farmers and fishermen are given support in terms of technology and skills improvement which is contrary to the Philippine setting.
He also said establishment of economic zones in rural areas shall divert investments to the countryside, inviting the urban poor to go back and take advantage of such opportunities.
Meanwhile, Filipino-Cebuano Business Club Inc. president Rey Calooy expressed optimism on the recent investment upgrade, citing that increased foreign direct investments (FDIs) could result to more economic opportunities for the SME sector.
He added that foreign investors who have higher business confidence in the country are expected to establish joint ventures with small-scale businesses to finance the latter.
Continuous money circulation, he said, is expected to provide more funds for entrepreneurs as credit access will become more lenient due to the competition in the market.
Despite the low interest rates from banks, he said the public, especially overseas Filipino workers, are projected to venture into business rather than just depositing their money in financial institutions.
“More business activities means more jobs created, higher purchasing power and more capital to invest. Inclusive growth should trigger a ripple effect, redounding to the grassroots level in terms of business and consumption. We expect more FDIs coming in. Others will then follow as they see a profitable investment in our country,†he continued.
Calooy, however, cited the government should look into agriculture, tourism and infrastructure as three main focus areas for improvement.
He said the agriculture sector posts a higher chance of growth with the presence of food security issues that need to be addressed while the tourism industry promotes job creation in the countryside.
Infrastructure, on the other hand, should be taken care of to improve the accessibility to market that could pave the way for higher productivity in business.
Roads and bridges, Calooy said, are among the basic services that investors consider along with power, water, and communication.
Though he commended the strict implementation of the Aquino administration in terms of fiscal reforms, anti-corruption and good governance agenda, he further noted that the government should prioritize electoral reforms and economic growth that should be felt by the majority.
While Calooy projected the possibility that Moody’s and S&P shall grant the same upgrade probably after the election period, Go cited that other credit-rating bodies shall follow Fitch’s move anytime soon.
“We expect all other credit ratings body to do the same in the next few months or even weeks, even next week. Since it is usually a game wherein the others follow the one which was the first to give the rating, the hot money will come,†Go told The FREEMAN. / JMD (FREEMAN)