Date: May 2003

The Ratings Game

Despite the positive spin from President Macapagal-Arroyo's Washington visit and signs of improving fiscal discipline, the gains of recent days may be a case of "too little and too late" to stop some further deterioration of the country's sovereign rating by the major credit ratings agencies.

According to Finance Secretary, Jose Camacho, who met with senior analysts of Moody's Investors Services while in Washington last week, Moody's has no intention of downgrading the sovereign rating assigned to the Philippines. Back in January, Moody's downgraded the local currency rating of the Philippines to "negative" but retained its "stable" outlook for foreign currency. Moody's rates the Philippine sovereign debt at Ba1, one notch lower than investment grade.

Meanwhile Fitch Ratings has recently had a team in the Philippines reviewing the country's performance and has announced that its result will be available in June. Fitch downgraded its outlook for foreign credit on the Philippines last November and a few weeks after Standard and Poor's did the same thing.

Last month S&P again downgraded the Philippines - from BB+ to BB. Again Fitch might follow suit. According to Fitch, the agency remained worried over the sustainability of recent economic gains and the impact that the 2004 elections might have on the economy as a whole.

 

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