The Philippines got a ratings boost from South Korea's NICE Investors Service Co. Ltd., which took into account various factors, including the country's improved fiscal policy, private consumption and the strong Philippine peso.
In a report distributed to reporters on Tuesday, NICE rated the country's long-term foreign currency at "BB+," with a positive outlook. The Philippines is currently rated one notch below investment grade by the top three credit-rating agencies, with a potential upgrade anticipated within the year.
In its report, NICE said that weak taxes have been holding back improvements in the country's fiscal condition but it noted that the Aquino administration has "advanced its tax administration, increasing overall tax revenue."
"In addition, the government has been committed to fiscal consolidation by taking various measures, like enacting the 'sin' tax law and implementing other fiscal-reform actions," it added.
"As the government has consistently enhanced the business environment to attract more investment, the efforts are expected to begin to deliver visible outcomes in the future," the agency said.
Cited in the report were "solid" private consumption, partly driven by continued growth of money from overseas Filipino workers [OFW], and the rapid expansion of the business process outsourcing (BPO) sector.
"Consumption based on [OFW] remittances is robust enough to absorb external shocks to some extent; on the back of increasing government expenditure and rebounding export, the economic growth rate of 2012 is expected to jump from that of the year before," NICE said.
While the strong peso has been cited as hurting the BPO and export businesses, the debt watcher said the currency's appreciation combined with the global economic slowdown has "largely contributed" to price stabilization.
NICE cautioned that relatively large public debts to gross domestic product have undermined the government's ability for infrastructure investment and that the share of foreign currency-denominated debts is still relatively high.
"But the increasing mid/long-term domestic borrowings may limit default risks that would be triggered by external changes," it said. (http://bit.ly/VW1zuv)
Business Mirror
