Barclays: PHL could land investment grade next year

An investment grade rating could be snagged by the Philippines next year should fiscal and governance reforms not lose steam, said British banking and financial services company Barclays. “We expect the Philippines to receive its first investment grade rating in H213 [second half of 2013], given the country’s reform-focused government and solid external balances,” Barclays said in its latest Emerging Markets Quarterly Report. The global banking giant noted that the enactment of the measure raising excise taxes on alcohol and tobacco may prompt a credit upgrade soon. “Reform progress has continued with the senate passing the sin taxes bill before year-end, in line with our expectation, which should boost revenues by P40-billion,” the report read. Gobal debt watchers have indicated that revenue-enhancing laws such as the sin tax bill are needed before the Philippines could land an investment grade. Fiscal reforms including new laws, intensified revenue collection and debt restructuring have been in the forefront of  the Aquino administration. Last Thursday, Standard and Poor's – which rates the Philippines at BB+, or one notch below investment grade – raised the country's credit outlook to positive from stable. This means that the debt watcher could raise the country's sovereign rating in the next 12 to 18 months. A similar move was made by Moody's Investors Service last Tuesday. Despite keeping the Philippines' rating at Ba1 or one notch below investment grade, Moody's said fundamentals place the country well within the Ba1 to Baa2 ratings range, or as much as two notches above investment grade. Fitch Ratings has kept the country's rating and outlook at BB+ and stable, respectively. But Barclay's said it is “likely to change” the outlook to positive “in the coming 3-6 months.” With tax reform measures in the pipeline, like the rationalization of fiscal incentive and mining sector reform bills, set to pick up steam next year, Barclay's said the country may face consecutive credit rating upgrades “We maintain our view that the Philippines will receive its first investment grade rating in H213, with a follow-up upgrade likely in H114 [first half of 2014],” it said.   “After the elections, we think the reform agenda should pick up pace as the president uses the second half of his term to achieve concrete results,” Barclays noted. — BM, GMA News