Moody's upgrades Philippines outlook


Moody's ratings upgrade is expected to boost the country's economy

MANILA, Philippines -- Asia got some good economic news on Tuesday, as ratings agency Moody's Investors Service raised its credit outlook on the Philippines.

It cited the government's efforts to lead the country to financial soundness.

It was a warm note on a day that saw Japan's stock market, the largest in the region, fall to an 18-year low.

Moody's also revised its outlook on the country's Ba1 long-term foreign-currency rating, to stable from negative. It made that call back in October 2000.

A matching outlook revision was made on the Ba2 long-term foreign currency ceiling for bank deposits.

Deficit contained

Moody's credited the government's efforts to keep the 2001 deficit target from ballooning.

The Philippine government posted a 147 billion peso ($2.87 billion) budget deficit in 2001, overshooting its target by only two billion pesos.

Moody's said the feat "was fairly ambitious for the new administration, in view of the debilitating fiscal legacy it inherited and the poor external environment it has faced."

Gloria Macapagal Arroyo took over the presidency from ousted Joseph Estrada in a turbulent start to 2001.

Deficit targets in the country had been missed by huge margins in previous years.

Moody's said the government was able to keep the deficit very close to the targeted level due to improved tax collection by the Bureau of Internal Revenue.

Moody's said it believes the new government can lower the deficit in 2002 to its target of 3.3 percent of gross domestic product, or 130 billion pesos, if reform are intensified and economic growth is "relatively decent."

Areas of strength

Moody's said the Philippines "shows some areas of strength" despite the effects of the weak global economy on the country's exports.

"Foreign exchange reserves holdings have been preserved at a level that provides insulation from external shocks, and competitive features of the Philippines foreign direct investment environment have helped to sustain such capital inflows," Moody's said.

Moody's warned that the Arroyo administration still faces an arduous task of battling corruption and implementing its poverty-alleviation programs.

Philippines Treasurer Sergio Edeza expressed dissatisfaction over Moody's criticism, according to Business World of the Philippines.

Edeza noting the government's accomplishments.

But Edeza was happy with the upgrade, which he expects to boost the financial markets and improve investor confidence in the country.

"That should give the local market more confidence that the economy is being managed well. Hopefully it will give more confidence to local investors," Business World quoted him as saying.

Moody's downgraded the country's foreign currency outlook to negative in November 2000, at the height of the political crisis over the Estrada administration.

Major ratings agencies such as Standard & Poor's and Fitch IBCA also cut the country's ratings during the same period.