Global Times - BBB credit rating affirmed for Philippines

BBB credit rating affirmed for Philippines

Source: Xinhua
[12:56 July 27 2009]
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The Japanese rating agency Rating and Investment Information, Inc. (R&I), affirmed the Philippines' sovereign rating of BBB, as steady inflow of remittances will keep the economy afloat amid a global economic slowdown.

A "BBB" credit rating means the Philippines' "creditworthiness is sufficient". R&I also assigned a "stable" outlook on the Philippines. This means that the credit rating does not face risk of being downgraded over the short term.

With the remittances continuing to support the economy, R&I is confident that the Philippine GDP isn't likely to contract in 2009.

"Thanks partly to the contribution from a positive year-on-year growth trend in remittances from overseas Filipinos, personal consumption, which accounts for a large percentage of gross domestic expenditures, has steadily maintained its driving role in the Philippine economy," the Tokyo-based rating agency said in a report issued Friday.

The cumulative remittances in the first five months of the year totaled 6.98 billion US dollars, up 2.8 percent from the same period last year, according to data issued by the Philippine central bank early this month.

R&I noted that the sharp drop in exports -- owing to the global recession -- has slowed the Philippine economy. But remittances, rising investments and foreign exchange reserves will support the country's growth this year.

R&I also recognized that the Philippine government has to reduce its fiscal reduction program as it has to increase spending to finance its fiscal stimulus package. The rating agency noted that this is just "an emergency measure" and won't necessarily change the government's stance to maintain fiscal discipline.

"Given this, it is less likely that the central government outstanding debt will balloon significantly and exceed an acceptable level," R&I said.

Philippine Finance Secretary Margarito Teves welcomes this report, noting that this should "further boost confidence that the Philippine economy will be able to hurdle the global economic crisis."

Teves reiterated the need to plug the deficit by boosting revenue collection and is hoping that the Congress will pass pending bills that will improve tax collection.