Editorial

Investment-grade

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The move of international credit watchdog Moody’s Investors Service to grant investment-grade status to the Philippines, announced days before President Aquino traveled to Bali to attend the Asia-Pacific Economic Cooperation summit, has cleared any remaining doubt on the economy’s financial health. All three major global credit-rating agencies—the others being Standard & Poor’s and Fitch Ratings—now view the Philippines as credit-worthy.

Moody’s cited the sustainability of the Philippines’ robust economic growth, the ongoing fiscal and debt consolidation, political stability, and improved governance as reasons for the upgrade. The rating also came with a positive outlook for the country: Even during the recent volatility in emerging markets, it showed a relative lack of vulnerability to external financial shocks, such as those arising from the anticipated tapering of the US Federal Reserve’s easy-money policy.

The ratings agency likewise revised its outlook for the Philippines’ government debt rating to positive, indicating the possibility of another upgrade in the next 12-18 months. It said the Philippines’ “economic performance has entered a structural shift to higher growth, accompanied by low inflation,” and cited as proof the country’s high gross domestic product (GDP) growth of 6.8 percent in 2012, which accelerated to 7.6 percent in the first half of 2013.

What does the rating upgrade mean? Theoretically, it implies that the Philippines is capable of meeting its obligations on time, with very minimal risk of skipping debt payments. As foreign lenders consider the country’s debt less risky because of the high rating, the government will have greater access to cheaper credit. Lower borrowing costs for the government, in turn, may mean more resources for it to spend on, hopefully, basic services for the people. Since yields on government debt paper are also used by local banks to price their loans to the local borrowers, this means households can expect lower interest rates for loans needed to acquire or build houses or buy cars. Businesses will also have access to cheaper credit, allowing them to expand their enterprises more easily, consequently leading to the creation of more jobs.

News of Moody’s action was greeted with the usual fanfare. Finance Secretary Cesar Purisima said the upgrade was the result of sound economic policies and the public sector’s push toward good governance. Said Purisima in a statement: “Good governance is truly good economics.” Added Budget Secretary Florencio Abad: “The upgrade by Moody’s completes the investment grades we aspired for. We can expect improvements in terms of foreign investments and tourism.”

But more than the rhetoric from government officials, there are nagging issues that urgently need to be addressed. At the top of the list is the oft-repeated but hardly explained “inclusive growth,” or should we say the absence of it. The robust economic growth in the past years has hardly made a dent on poverty incidence. The percentage of Filipinos living below the poverty line remained practically the same between 2006 and 2012. In a report, the National Statistical Coordination Board said an estimated 28 percent of Filipino households were believed living in poverty in the first semester of 2012—nearly unchanged from the same period in 2009 (28.6 percent) and in 2006 (28.8 percent).

There is no doubt that President Aquino has done much to improve the economy as a whole since taking over from the past regime. However, more effort and sound judgment are required to allow the fruits of economic development to finally benefit the masses. His administration will not achieve this if it retains the corruption-tainted pork barrel system and such questionable schemes as the Disbursement Acceleration Program. It also has to address a number of mundane issues that continue to afflict the ordinary folk, like the traffic nightmare in Metro Manila which seems to get worse by the day, the sorry lack of efficient public transport, the delays in the flagship Public Private Partnership program, inadequate basic services, and the like. Most important, the administration must make sure that the plunder of taxpayer money is stopped, and those found guilty of the crime are justly punished.

Moody’s action gives all of us in the public and private sectors the opportunity to show the international community that the Philippines deserves to be branded investment-grade. Let us not blow this rare chance.

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  • AlbertL

    We are investment grade when the key instruments of justice is now proactively at work. When the COA, DOJ, Ombudsman, SandiganBayan and the Supreme Court have shown they are no mere fixtures to cover up graft and corruption of past and present administrations. We will continue to gain higher credit rating, when ex-presidents, incumbent senators, congressmen, cabinet officials, bureau officials, are indicted, prosecuted, convicted and jailed on the basis of solid evidence. When their bank accounts and other ill-gotten wealth are reverted to the government. We’ve just started the long trek to gain the respect and dignity for our country… long abused by trapos…

  • Oscuro

    What has made the economy move? Did we produce more agriculture? Did we make more computer chips or commercial parts? BPO & other intellectual services? What other products or services other than the OFW $ helped increase our current account? Not that we exported Jeepneys around the world. Minerals? Anybody?

    • Kenjie Hasaki

      You can take the report from moody’s so that we may know. Its all there.

      • Oscuro

        All I can read is about having more foreign currency surplus and having to rely less on direct investments or something. Nothing else.

      • Kenjie Hasaki

        There is a whole more than 500 page report. And all the computation and projections. You can go to moody’s website. You can purchase the item if you want.

      • Oscuro

        is there something free and 3 pages long?

    • Diepor

      More callcenter jobs was outcourced to Philippines meaning that some people in India and other places lost their jobs because they cant compete with our willingness to accept lousy pay and bad conditions.

      • Oscuro

        Pay scale is relative.

      • Diepor

        Its not relative to the company that outsource. They move the jobs because the cost is lover.

      • Oscuro

        it is to this discussion. I just want to know what we produce. Not the circumstances of its employment.

      • Diepor

        We are big in outsourcing, relocating a business function from another country. Thats what we produce.
        Financial savings from low philippine labor rates is a big motivation for outsourcing

      • Diepor

        in other words callcenters

      • Oscuro

        No different from the motivations of companies to move their factories to China. For the cheap labor.

      • Diepor

        true

      • Oscuro

        But at least China is building something tangible. Training their work force to build and create material objects. Ours are services and financial instruments that isn’t even in our hands.

      • hello stupids

        It is just the beginning and the end is near if other Filippo have the same vision and knowledge like U
        stupidssssssssssssssssssssssss

      • hello stupids

        they moves the job because people can’t stand the Indian behaviour !!!!!!!

      • Diepor

        Hey racist. The big companys think about money and little else.

      • hello stupids

        stupids that’s the truth nothing about racist..C.MON

      • Diepor

        You are attacking a group of people, the Indians, saying the are not well behaved. Thats racist.

      • hello stupids

        U attitude is very much like them and that’s the reason they lost their contract
        stupids

      • hello stupids

        India lost their jobs because of their rough attitude and accent .and too many complain so giving Philippines a go even Indian have better back up knowledge and qualification

    • Charlotte Samaniego

      The no. 1 export of the Philippines? Tao niya… Wala namang production sa Pilipinas except bata.

      • Oscuro

        Other than OFW and their $’s…..read it again. Other than that….what do we produce?

  • Charlotte Samaniego

    Moody’s? S&P? Fitch? Di ba sila din iyong nagsabing AAA daw ang rating ng Lehman Brothers? At ang pagbagsak ng Lehman ang nag-palabas nitong financial crisis na limang taon ng nararanasan? Maski nuong araw na nag-file ng bankruptcy ang Lehman, triple A pa rin ang rating ng tatlong kumpanyang ito, na di mo naman alam kung ano ang basehan ng mga ratings nila.

  • hello stupids

    the truth about international credit watchdog Moody’s Investors Service to grant investment-grade BBB-status to the Philippines,

    Thailand is BBB+

    Malaysia is A+

    China Japan and US is AA+

    Hong Kong is AAA

    Philippines come last except Cambodia in Asean and is no where near the north east asia

    Philippines, GDP per capita 2,587.88 USD (2012)
    Thailand, GDP per capita 5,473.75 USD (2012)
    Malaysia, GDP per capita 10,380.54 USD (2012)

    Singapore, GDP per capita 51,709.45 USD (2012)

    By the look of the figure Philippines should be downgrade to CCC+

    • Cali Pulaco

      a typical example of crab mentality: good news is still bad news.

      why don’t we just appreciate the fact that economy has improved?

      • hello stupids

        good news is have the foundation sound not from the incomes of the OFW
        the export factotr is down so where is the grow?

      • Cali Pulaco

        I’m not arguing that the bulk of our GDP comes from remittances. It’s true. But at least this time, you see that it hasn’t been pocketed by crooks, and the those who have stolen are facing the wrath of the president.

        The reason export slowed down is because all the markets in asia are slowing down, and the US economy is still in recession.

        What we need now is keep doing what we’re doing. Keeping vigilant, work hard, be entrepreneurial, and help those who want to help the country.

    • Ric Atencia

      Do you think that by GDP per capita is the only basis for downgrading to CCC+?

      What made you think that the Philippines should be downgraded to CCC+?

      • hello stupids

        what make U think they upgrade U to BBB- ??????
        if your grow cannot maintain of course they will downgrade U again

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