Saturday, September 10, 2011

...the PH credit upgrade

PHL credit upgrade possible in Q1 2012, investment report says

The Aquino administration’s efforts to keep spending subdued and stay below its 2011 deficit cap may be rewarded with another international credit rating upgrade as early as the first quarter of 2012, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said Friday.

“Should the full year deficit end up around or below our estimated deficit, we may expect the country’s public debt-to-GDP ratio by end-2011 to fall to some 49%, the lowest debt ratio since 1983. This would likely enable the country to earn its much-awaited credit rating upgrade in Q1 2012," FMIC and UA&P said in their August 2011 The Market Call.

Last June, Moody's gave the Philippines a rating upgrade to "Ba2", followed by Fitch which stamped a "BB+" on the country's long-term currency debt.

Shortly after the Fitch upgrade, Finance Secretary Cesar Purisima said “We hope to hit investment grade within the first half of the Aquino administration." Fitch Ratings’ upgrade was the Philippines' first in eight years.

Low spending, positive tax haul

FMIC and UA&P showed how national government spending plummeted to P698.9 billion and the budget deficit settled to a “miniscule" P17.2 billion. They also noted that the Aquino administration saved P12.2 billion on interest payments and cut expenditures and allotment to local government units by 12.1 percent.

“Because of the low budget deficit record even after H1 and the recent report of Bureau of Internal Revenue that it is still possible to meet its P940-billion tax collection target by the end of the year, we believe that the NG [national government] can boost its spending in the coming months to spur economic activity and still not exceed our expected P250-billion budget deficit for the whole year," the August 2011 investment report said.

But unlike the analysis of other experts, FMIC and UA&P downplayed the importance of boosting government spending because they “do not see any need for accelerating spending to stimulate the economy, as the lower debt ratio will translate into less interest payments and the savings channeled to more infrastructure and basic services spending."

FMIC and UA&P noted the 12.7 percent growth in the BIR’s tax take from 11.5 percent in May. They also said the appreciation of the peso has eroded the Bureau of Custom’s collections, which “remained negative at -6.8 percent, though marginally better than the previous month’s -9.5 percent."

“Tax revenues reached P593.4-billion representing a 9.8 percent uptick. While the BIR collections had double-digit 13.5% growth for H1, the BoC slumped by -1.7 percent from the same period last year," the investment report also said.

“In fact, BIR has reported that its tax collections rose by an impressive 15.6 percent in July, bringing the January- July total to P531.8 billion, only P3.1 billion lower than the projected P534.9 billion," the report added.— ELR/MRT/VS, GMA News

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