DBM: Good governance led to Standard & Poor’s credit rating upgrade

Thursday 5th of July 2012

QUEZON CITY, July 5 (PIA) -- The Department of Budget and Management said the foreign currency rating upgrade by Standard & Poor (S&P) last Wednesday validates President Aquino’s platform of good governance as a driver for sustainable economic growth.

“We thank Standard & Poor’s (S&P) for its favorable assessment of the Philippines’ sovereign credit,” Budget Secretary Florencio B. Abad said in a statement. “We thank them as well for recognizing the progress of the Aquino Administration in ensuring fiscal stability through improved revenue administration and prudent and effective public expenditure.”

The S&P upgraded Wednesday the foreign currency rating of the country to ‘BB+’ from ‘BB’ with a stable outlook, putting the Philippines one notch lower from the investment grade.

The upgrade, which marks the 8th positive credit ratings action under the current administration, was attributed to the increasing fiscal flexibility of the country.

Abad said government reform efforts resulted in interest payment savings of P49.33 billion, or 11 percent of what was programmed for January 2011 to May 2012. "Next year, we are programmed to bringing our fiscal deficit down to 2 percent of gross domestic product (GDP) from 3.5 percent in 2010, as well as lowering our debt stock to 49.5 percent of GDP from 52.4 percent in 2010."

"The foreign currency rating upgrade reflects our assessment of gradually easing fiscal vulnerability, as the government's fiscal consolidation improves its debt profile and lowers its interest burden," Standard & Poor's credit analyst Agost Benard said in a statement.

This improvement now also puts the foreign currency rating on par with the long-term local currency rating, which was affirmed by S&P.

The agency, however, said it may lower the ratings if the government's commitment to fiscal consolidation weakens, resulting in rising debt, or if the external liquidity position deteriorates significantly.

“We remain committed to fiscal consolidation," Abad said. (NFK/PIA-Central)