PHL exposure to euro debt crisis moderate, says S&P

The Philippines is "indirectly... moderately exposed" to economic shocks from the euro zone, global debt watcher Standard & Poor's said Thursday on the sidelines of the 45th Asian Development Bank Board of Governors’ Annual Meeting.   Ritesh Maheshwari, S&P managing director and lead analytical manager, said the Philippine exposure could be traced to its 12-13 percent exports to the euro zone.   Credit ratings, including S&P’s, serve as indicators of the level of risk that comes with long-term securities offered by countries or sovereign and other issuers. The higher the rating, the lower the risk of default.   The Philippine outlook was last changed on Dec. 16, 2011, when the outlook was "revised to positive from stable." Its rating for foreign currency debt securities is at BB/Positive, or below investment grade.   The Philippine sovereign debt rating “has climbed to BB+ with Fitch and BB with positive outlook at S&P,” Bangko Sentral ng Pilipinas Gov. Amando Tetangco Jr. shared at a forum at the ADB annual meeting.   “We're still waiting for Moody's to come around although, I have to say, the markets have moved faster than all three major credit rating agencies, if one were to base rating on the actual pricing that Philippine debt has been able to manage of late," the central bank chief said.   "For the emerging market world, these upgrades represent more than a simple badge of honor,” noted Tetangco.   “By reflecting improved credit worthiness, the higher ratings also bring with them the opportunity to achieve lower financing costs and increased [foreign direct investment] flows,” the central bank chief said.   “These trends, in turn, provide new impetus for greater corporate sector investment, enhanced job creation and ultimately," he added.

  S&P said last December its "forecast growth of the country's gross domestic product this year is 4.2 percent. The ratings are also constrained by the high albeit declining level of public debt and attendant interest burden."   The credit rating agency also noted:

• general government debt is 41 percent of GDP

• interest burden on general government revenues is at 16 percent and

• foreign-currency denominated debt is 42.5 percent of the total government debt.

"An additional constraint on the ratings is a narrow tax base and high levels of non-compliance. These have been the principal causes of the weak state of public finances and the high public debt," S&P said. —VS, GMA News