Bangkok--4 Jan--Moody's
Moody's Investors Service will assign a provisional rating of (P)Ba2 to the Philippine government's forthcomingglobal bond issuance.
RATINGS RATIONALE
Moody's upgraded the Philippines' foreign currency and local currencysovereign ratings to Ba2 from Ba3 on 15 June 2011. The rating outlook isstable.
The key drivers for the decision were: 1) significant progress on fiscalconsolidation; and 2) macroeconomic stability underpinned by astrengthening external payments position, well-anchored inflationexpectations, and strong growth.
The rating is supported by sound macroeconomic policy management asinflation has remained relatively subdued despite historically high ratesof growth in 2010. In addition to the deterioration in external demand,real GDP growth in 2011 has been adversely affected by the absence of afiscal impulse. The Philippines' external payments position continues tobe bolstered by healthy remittance inflows, as well as increasingly largereceipts from the business process outsourcing (BPO) sector. Coupled withsizeable capital inflows, the robust current account surplus has led tothe accumulation of international reserves to $76.4 billion, or more thansix-times residual short-term external debt according to the BSPdefinition, as of end-November 2011.
The consolidation of government deficits over the past year have resultedfrom a combination of expenditure restraint and, more importantly,improved revenue performance despite a lack of tax increases. The growth in tax revenues have outpaced that of nominal GDP growth over the first11 months of 2011, while adept debt management has led to an 8.5%decrease in interest payments over the same period. However, capitalexpenditures have fallen behind target as the Aquino administration'scornerstone public-private partnership (PPP) program for infrastructuredevelopment has been slowly implemented. The facilitation of processes tospeed up the PPP program, in addition to a small fiscal stimulus program,should help support economic growth in 2012 in the face of slowing
external demand.
The government also carries a large public-sector debt overhang relativeto its peers, but its borrowing requirements are amply met by sufficientliquidity in the domestic market and favorable access to the global bondmarket. In addition, lower risk and inflation premia have contributed to
a substantial decrease in debt servicing costs over the past year.
The principal methodology used in this rating was Sovereign BondMethodology published in September 2008. Please see the Credit Policypage on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country which hasnot been recognized as endorsable at this date, this credit rating isdeemed "EU qualified by extension" and may still be used by financialinstitutions for regulatory purposes until 31 January 2012. ESMA mayextend the use of credit ratings for regulatory purposes in the EuropeanCommunity for three additional months, until 30 April 2012, if ESMAdecides that exceptional circumstances arise that may imply potentialmarket disruption or financial instability. Further information on the EUendorsement status and on the Moody's office that has issued a particularCredit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt, thisannouncement provides relevant regulatory disclosures in relation to eachrating of a subsequently issued bond or note of the same series orcategory/class of debt or pursuant to a program for which the ratings arederived exclusively from existing ratings in accordance with Moody'srating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to therating action on the support provider and in relation to each particularrating action for securities that derive their credit ratings from thesupport provider's credit rating. For provisional ratings, thisannouncement provides relevant regulatory disclosures in relation to theprovisional rating assigned, and in relation to a definitive rating thatmay be assigned subsequent to the final issuance of the debt, in eachcase where the transaction structure and terms have not changed prior tothe assignment of the definitive rating in a manner that would haveaffected the rating. For further information please see the ratings tab
on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the rating are the following :parties involved in the ratings, public information, and confidentialand proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the ratedentity, obligation or credit satisfactory for the purposes of issuing arating.
Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody'sconsiders to be reliable including, when appropriate, independentthird-party sources. However, Moody's is not an auditor and cannot inevery instance independently verify or validate information received inthe rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Christian de Guzman
Asst Vice President - Analyst
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Thomas J. Byrne
Senior Vice President - Regional Credit Officer
Sovereign Risk Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
? 2011 Moody's Investors Service, Inc. and/or its licensors
and affiliates (collectively, "MOODY'S"). All rights reserved.