Next Japanese debt watcher upgrades Philippines

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PhilsRating and Investment Information Inc (R&I), a debt watcher from Japan, has upgraded its Philippines’ credit outlook from “stable” to “positive” citing “progressive changes in the country’s fundamentals.”

In an a statement released by the R&I on August 2, the Philippines’ foreign currency issuer rating was affirmed at rating of BBB-, while the country’s foreign currency short-term debt rating was affirmed at rating of -2.

According to an online reference by the Rating and Investment Information, the country’s new issuer rating of BBB- means that the Philippines’ creditworthiness is adequate but requires attention in times of major changes in the economy. Meanwhile, a -2 short-term debt rating signifies that there is a high probability of the country paying short-term obligations.

“The economy of Republic of the Philippines has started to show strong growth thanks to continued robust consumption driven by remittances from Overseas Filipino Workers, coupled with expansions in public investment and exports,” said the Japanese debt watcher.

“At the same time, the inflation rate has been stable. As a result of the sustained current account surplus, the level of foreign reserves is rising. This has diminished concern about external liquidity,” it added.

Financial management has also improved, it noted, and “steady” progress towards fiscal consolidation has allowed the government to spend more on infrastructure and education.

R&I likewise cited the country’s stable political environment, which it said had helped attract investments.

“The government significantly restored the peace of western Mindanao, a part of the island which used to ruin the country’s image. As improvement of the investment climate will accelerate direct investment by foreign investors, expectations for sustainable expansion of investment are growing,” it said.

“If fundamentals for economic growth are solidified and steady increases in per-capita income become more promising, R&I will consider a rating upgrade.”

The Philippine economy expanded by 6.8 per cent in 2012, substantially higher than the 3.6% recorded in the previous year and above the government’s 5-6 per cent target. In the first quarter, growth was a better-than-expected 7.8% — faster than the government’s 6-7 per cent  goal for this year.

R&I said the economy’s growth would likely “stay robust” this year and the next.

Inflation – 2.93% as of end-June, at the low end of the central bank’s 3-5 per cent target — is likewise expected to settle within target.

“Furthermore, public- private partnerships… are expected to gain the momentum… Whether such trend will be translated into a steady rise in investment ratio, and in turn, investment will serve as a growth driver, along with consumption, will be the key to future economic growth,” it said.

R&I, however, noted that the country’s per-capita gross domestic product was still low relative to its peers in the region.

“The Philippines is the only country which has yet to reach per-capita GDP of $3,000 among the five founding members of ASEAN; at long last, the country sees a clearer opportunity for catching up,” it noted.

Public investment, while up, could also still be improved.

“The fiscal position serves as a major constraint. The 2012 figures show that tax revenues are only 12-13 per cent of GDP. R&I positively views the government’s leadership in raising the ‘sin’ tax levied on tobacco and alcohol beverages. Still, reform on the tax code and system aimed at a stronger tax collection capacity and better spending efficiency remains an important issue to be addressed,” it noted.

The government also still needs “to address the issues ranging from lack of infrastructure to the perception of widespread corruption in order to improve the investment climate.”

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Reading Time: 3 minutes

Rating and Investment Information Inc (R&I), a debt watcher from Japan, has upgraded its Philippines’ credit outlook from “stable” to “positive” citing “progressive changes in the country’s fundamentals.”

Reading Time: 3 minutes

PhilsRating and Investment Information Inc (R&I), a debt watcher from Japan, has upgraded its Philippines’ credit outlook from “stable” to “positive” citing “progressive changes in the country’s fundamentals.”

In an a statement released by the R&I on August 2, the Philippines’ foreign currency issuer rating was affirmed at rating of BBB-, while the country’s foreign currency short-term debt rating was affirmed at rating of -2.

According to an online reference by the Rating and Investment Information, the country’s new issuer rating of BBB- means that the Philippines’ creditworthiness is adequate but requires attention in times of major changes in the economy. Meanwhile, a -2 short-term debt rating signifies that there is a high probability of the country paying short-term obligations.

“The economy of Republic of the Philippines has started to show strong growth thanks to continued robust consumption driven by remittances from Overseas Filipino Workers, coupled with expansions in public investment and exports,” said the Japanese debt watcher.

“At the same time, the inflation rate has been stable. As a result of the sustained current account surplus, the level of foreign reserves is rising. This has diminished concern about external liquidity,” it added.

Financial management has also improved, it noted, and “steady” progress towards fiscal consolidation has allowed the government to spend more on infrastructure and education.

R&I likewise cited the country’s stable political environment, which it said had helped attract investments.

“The government significantly restored the peace of western Mindanao, a part of the island which used to ruin the country’s image. As improvement of the investment climate will accelerate direct investment by foreign investors, expectations for sustainable expansion of investment are growing,” it said.

“If fundamentals for economic growth are solidified and steady increases in per-capita income become more promising, R&I will consider a rating upgrade.”

The Philippine economy expanded by 6.8 per cent in 2012, substantially higher than the 3.6% recorded in the previous year and above the government’s 5-6 per cent target. In the first quarter, growth was a better-than-expected 7.8% — faster than the government’s 6-7 per cent  goal for this year.

R&I said the economy’s growth would likely “stay robust” this year and the next.

Inflation – 2.93% as of end-June, at the low end of the central bank’s 3-5 per cent target — is likewise expected to settle within target.

“Furthermore, public- private partnerships… are expected to gain the momentum… Whether such trend will be translated into a steady rise in investment ratio, and in turn, investment will serve as a growth driver, along with consumption, will be the key to future economic growth,” it said.

R&I, however, noted that the country’s per-capita gross domestic product was still low relative to its peers in the region.

“The Philippines is the only country which has yet to reach per-capita GDP of $3,000 among the five founding members of ASEAN; at long last, the country sees a clearer opportunity for catching up,” it noted.

Public investment, while up, could also still be improved.

“The fiscal position serves as a major constraint. The 2012 figures show that tax revenues are only 12-13 per cent of GDP. R&I positively views the government’s leadership in raising the ‘sin’ tax levied on tobacco and alcohol beverages. Still, reform on the tax code and system aimed at a stronger tax collection capacity and better spending efficiency remains an important issue to be addressed,” it noted.

The government also still needs “to address the issues ranging from lack of infrastructure to the perception of widespread corruption in order to improve the investment climate.”

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