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PIA Press Release

PH credit rating upgrade expected

Manila (19 November) -- The Deaprment of Finance (DoF) is expecting more credit ratings upgrades from international agencies to follow New York -based Standard & Poor's recent upgrade due to the country's improving economic fundamentals.

Finance Secretary Cesar Purisima explained in an interview that the credit default swaps of Philippines, one of Asia's most aggressive sovereign borrowers, is far better than those of Indonesia, which is rated a notch higher.

"The market is the best gauge, they rate us better than Indonesia. We're focusing our work on the fundamentals and will continue to do so," Purisima said.

"And hopefully the rating will follow," he added.

Last week, S&P's rating on the country's long-term foreign currency denominated debt was raised one level to BB from BB-, the first upgrade since 1977 and brings the measure to the second-highest non-investment grade, the same as Indonesia and Vietnam.

A higher debt rating may reduce the cost of borrowing, allowing the Philippines to spend more on roads and bridges to meet President Aquino's pledge to expand the economy by as much as 8 percent annually from 2011.

President Aquino, who took office in June, is winning investors' confidence as he goes after tax evaders and corrupt officials to narrow a budget deficit forecast to reach a record P325 billion this year.

Moody's Investor Service, who visited the Philippines early this year, had upgraded the country's credit rating outlook to positive, while its rating on the country's debt increased by one level to Ba3, also the first upgrade since 1997.

Fitch Ratings, meanwhile, in August affirmed the Philippines' BB credit rating, two levels below investment grade and retained its stable outlook.

But Fitch said it was closely monitoring the Philippine government efforts to increase tax revenues, noting that improvements on the fiscal front is a primary consideration for any upgrade to the country's debt ratings.

Like Fitch, S&P also has a stable outlook for their below-investment grade rating for Philippine debt.

The finance department earlier said the Philippines deserves a credit ratings upgrade given the country's improving economic fundamentals, a more stable political environment, and the markets' favorable view of the Southeast Asian nation. (PIA-MMIO) [top]

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