Moody's keeps positive outlook on the Philippines

This is good news for Arroyo who is always ready to crow about how well the Philippine economy is doing. Obviously Arroyo is not doing so much for the least well off that she is worrying the investor rating services! However with inflation and a shortage of rice NPA futures and those of the Muslim separatists may be set to rise as well!


Moody's keeps positive outlook on Philippines
By Raju GopalakrishnanReuters
Posted date: June 09, 2008
MANILA, Philippines – (UPDATE) Moody's Investor Service is maintaining its positive ratings outlook on the Philippines, despite a slippage in its goal of a balanced budget this year, one of the agency's senior economists said Monday.
"They have pushed back the balanced budget target but there is still overall fiscal restraint," Moody's senior vice-president Tom Byrne said in a telephone interview.
"They are still not blowing the budget. The positive outlook is still the outlook for the Philippines."
The government said earlier this month that it was pushing back the goal of a balanced budget to 2010 from this year, and that it expected to end the year with a shortfall of about P75 billion ($1.7 billion), or about 1.0 percent of gross domestic product (GDP).
President Gloria Macapagal Arroyo has ordered subsidies to shield the poor from surging inflation on top of a government infrastructure building program aimed at protecting the economy from falling growth.
"The government hasn't lost control," Byrne said. "Moderate GDP growth and a deficit of 1.0 percent of GDP or a little bit higher is consistent with the positive outlook we have on a B1 rating."
In February, Moody's raised the credit rating outlook on the Philippines to positive from stable on the back of the government's improving finances after a stellar 2007 for the economy.
But it kept the country's debt rating at B1, or four notches below investment grade.
The Philippines recorded 7.2 percent GDP growth last year, a 31-year high, while inflation remained at a two-decade low. After years of runaway budget deficits, the shortfall shrank to 0.2 percent of GDP.
"One good thing about last year was that with the smaller budget deficit, and lower interest payments, the government could afford to spend money on public infrastructure," Byrne said.
"So for the first time in something like five years, investment actually grew as a share of GDP."
The challenge this year, Byrne said, was whether the government could keep up the spending on infrastructure.
"It's almost coming down to a choice between rice or roads because the government will have to, for political necessity, help the poor people and subsidize rice."
"The trend of improvement in fiscal headroom for such spending on infrastructure, or social welfare expenditure, has certainly shrunk," he said. "But right now, we feel it won't be a tremendous burden on the budget."
($1 = P44.20)
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