Moody's Investors Service has raised its outlook on Philippine ratings to positive from stable, citing the government's easing dependence on external financing. "Improved macroeconomic conditions and fiscal performance are mutually reinforcing each other," said Moody's senior vice president Tom Byrne in a statement released in Manila Friday.
The ratings include long-term government foreign and local-currency ratings, foreign-currency bank deposit ceiling and foreign currency country ceiling.
Byrne said a stronger Philippine peso and lower domestic interest rates have significantly lowered debt service payments "freeing budgetary resources for much-needed infrastructure spending, which is helping to resuscitate the long-languishing levels of investment in the country's economy."
"The government has not masked inflation by subsidizing retail petroleum prices, thereby avoiding contingent fiscal liabilities and adding pressure on the balance of payments by encouraging higher oil imports," said Byrne.
"This policy also avoids running into political problems down the road, if subsidies were to become too costly and needed to be rolled back," he said.
He said smaller budget deficits and the country's improved external payments position have allowed the government to prepay external public sector debt and to shift budgetary financing to depend less on foreign funding.
"We believe the government will continue to face considerable challenges in sustaining progress in strengthening its fiscal position, and deficit reduction may not be as readily achievable as in the past several years," said Byrne.
"Populist, political maneuvering in Congress may water down the tax effort, and spending pressures may increase well before the 2010 presidential election."
Source: Good News Pilipinas
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