Moody's sees PHL, Emerging Asia credit rating stable in 2013
The creditworthiness of emerging Asian markets, including the Philippines,
is likely to remain stable this year while local currency debt will account for
a chunk of financing needs indicating stability of state coffers, debt watcher
Moody's Investors Service in its latest report on the region.
“The past decade has seen a mixed picture of creditworthiness among
Emerging Asia ex. China sovereigns, although the overall trend suggests
stability,” Moody's noted in the report “Emerging Asia 2013 Government Financing
Needs” released Friday.
Emerging Asia, excluding China, comprises Bangladesh, India, Indonesia,
Malaysia, Mongolia, Pakistan, Philippines, Sri Lanka, Thailand, and
Vietnam.
“Of the 10 countries that comprise the group, six have shown the same
rating since the beginning of the decade or since the ratings were assigned
during the last 10 years,” the report read.
Moody's upgraded the Philippines at Ba1 or one notch below investment grade
last year on based on improved fiscal position.
The country underwent a deterioration in creditworthiness, moving three
notches down to B1 in 2005 from Ba1 in 2002.
Moody's noted the region is becoming more reliant on local borrowing to
meet financing needs.
“During this year, the 10 sovereigns will continue to fund themselves
overwhelmingly from their domestic markets, using foreign currency debt for just
5 percent of their total gross financing needs,” the report read.
“This relatively low dependence on foreign-currency denominated external
financing imparts stability to government finances,” it added.
The debt watcher estimates the gross financing needs for Emerging Asia
sovereigns at $660 billion or equivalent to 13.8 percent of the region's gross
domestic product in 2013, up from $629 billion estimated for 2012, but lower as
a share of GDP at 14.5 percent last year.
Debt restructuring to borrow more locally alongside intensified revenue
collection have been in the forefront of the Aquino administration's fiscal
reforms.
Domestic debt is comprised mostly of Treasury bills and bonds, while
external debt is mostly of sovereign bonds and direct loans availed by
government agencies.
The Philippine government debt rose by 9.8 percent year-on-year to P5.437
trillion last year. Despite the increase, the end-2012 debt level is lower than
the P5.52 trillion last year.
Moody's, however, warned that weak infrastructure and governance may
continue to stunt any rating upgrade for the 10 countries.
“India, Indonesia, Thailand and Philippines all face credit constraints in
the form of weak governance, while governance and transparency weakness were
factors behind the downward pressure on Vietnam’s rating,” the report
read.
“Almost all the group’s sovereigns face infrastructure constraints,” it
read. “In this context, infrastructural improvements and the concomitant boost
to potential growth are cited as potential ratings lifts for Bangladesh, India,
and Indonesia.
“While most sovereigns in the group maintain favorably strong external
payments positions, Pakistan’s position has been a key weakness and driver of
its credit deterioration, while Sri Lanka’s and India’s remain monitored risks,”
the report added. — VS, GMA News
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