Investment-Grade Rating Is Seen Getting By The Philippines In 2 years

According to DBS Group, The Philippines could achieve investment-grade credit rating within a year or two if reforms that have so far yielded positive results are kept up. The financial services provider issued the statement following last week’s move by Standard and Poor’s to raise the Philippines’ international debt rating to one notch below investment grade, mainly due to the government’s stronger financial position. “Notably, this puts the Philippines in the same rating as Indonesia,” DBS said in a new research note. “This does not come as a surprise as we have been highlighting that the Philippines has a significantly stronger fiscal and debt profile compared to just a few years ago,” it added.

Last month, the Bureau of Treasury reported a budget deficit of P22.8 billion in the five months to May, which was just one-fifth of the P109.34 billion that the government intends to spend on top of national budget for the first semester.

DBS notes that, in comparison, the average five-month deficit in the past five years was P67.3 billion. The Singapore-based group said that “The government still ran a primary surplus [the budget profile without interest expenses] amounting to P108 billion as of May.”

DBS said that with a gross domestic product growth of 6.4 percent year on year recorded in the first quarter, and “even after accounting for a slowdown in the second semester, the government’s growth target of 5 percent to 6 percent appears to be realistic.”

he group’s own forecast for full-year GDP growth is currently nailed at 5.3 percent—an upgrade from its previous forecast of 4.2 percent. Further, DBS maintains its expectations for the Philippines to post a current account surplus of $6.2 billion in 2012, down from $7.1 billion in 2011. The current account refers to the balance of the inflow and outflow of goods, services, and other funds such as income, donations and debt payments. It is a main component of a country’s balance of payment, which is a record of all monetary transactions between itself and the rest of the world.

“Remittances growth, although slowing, have proven to be resilient, while services exports (especially through business process outsourcing) have been expanding strongly,” DBS said. They also added that “an investment-grade rating within the next one to two years is a definite possibility if the reform pace is maintained.”

RP posts P28.67-billion consolidated public surplus

MANILA, Philippines – The country posted a consolidated public sector surplus of P28.67 billion in 2008 or 0.4 percent of gross domestic product, (GDP), marking the third consecutive yearly surplus for the public sector, latest data from the Department of Finance (DOF) showed.

The P28.6 billion surplus is P7.326 billion higher than the P21.347 billion surplus posted in 2007, data from the DOF also showed.

The DOF attributed the significant increase in the public sector surplus to healthier finances of government-owned and controlled corporations (GOCCs), other state-owned agencies and local government units even in the wake of the global financial turmoil.

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Bangko Sentral sees improved economy in second half of 2009

MANILA, Philippines – Bangko Sentral ng Pilipinas (BSP) officials said they expect the country’s economic performance to improve during the second half of this year.

The BSP has reduced its policy rates by a total of 200 basis points since December last year to bring down borrowing costs and encourage economic activities.

BSP Deputy Governor Diwa Guinigundo told reporters that the BSP had no clear indications of how the economy performed in the second quarter but prospects appear better for the second half of the year.


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Slow pay rise to increase number of poor families

MANILA, Philippines – Slower pay hikes – especially among low salary earners – are expected to increase the numbers of poor Filipino households this year, an official said.

Since the hike in salaries – especially among the lower income brackets – “is not as fast as the increase in prices,” Filipinos above the poverty threshold may find themselves below the poverty line, Romulo Virola, secretary general of the National Statistical Coordination Board (NSCB) said.

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Economic growth slackens to just 0.4% in first quarter

The economy, as measured by gross domestic product (GDP), grew by a measly 0.4 percent in the first quarter of this year, compared to a 3.9 percent growth in the same quarter in 2008, the biggest contraction in the last two decades and below the 2.5 percent earlier expected by the government .

The drop in the GDP growth was weighed down by the impact of the US financial meltdown and the global crisis, historic declines in manufacturing and trade.

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Debt payments increase during the first quarter

MANILA, Philippines – Philippine debt payments rose after Manila retired existing bonds by exchanging them for newer securities maturing in five and seven years, a move seen to provide more bond market liquidity.

Some P291.55 billion was spent for the first three months this year to settle local and foreign obligations, data from the Bureau of Treasury (BTr) showed. The amount is 22 percent higher than P239.38 billion alloted during the same period last year.

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RP blacklist may bar Pinoys from work abroad

MANILA, Philippines – Filipinos may have a difficult time finding employment in the world’s 20 richest countries after the Philippines was identified as an “uncooperative tax haven,” a recruitment consultant said.

Nations belonging to the G-20 may withhold employment for Filipinos especially if Manila fails to take steps that would make bank secrecy and tax information more transparent, recruitment consultant Emmanuel Geslani said.

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Consumer pessimism remains in first quarter

FILIPINOS remain pessimistic in the first quarter as concerns over unemployment and low incomes outweighed the easing of inflation, according to a Bangko Sentral ng Pilipinas (BSP) survey.

In its Consumer Expectation Survey, the BSP said the overall consumer confidence index registered -25.7 percent in the first quarter, from -32.1 percent and -40.3 percent in the first and fourth quarters last year.

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Local, overseas events to set trading pace

The government is expected to announce the gross domestic product (GDP) growth for 2008 on Thursday, while the Monetary Board of the Bangko Sentral ng Pilipinas will meet also on Thursday to revisit policy.

The Federal Open Market Committee, the policy-making body of the US Federal Reserve, is scheduled to meet Jan. 27 and 28, also to review policy.

The benchmark Philippine Stock Exchange index (PSEi) declined by 4.76% or 92.79 points to 1,857.34 last week compared to the previous week.

“Key events may drive the market higher as the main index is on oversold levels,” DBP-Daiwa Securities, Inc. said.

The government expects full-year GDP growth at 4.2% to 4.5%.

DBP-Daiwa pointed out that although the government has already given the guidance regarding GDP growth, there might be positive surprises that could buoy investors’ appetite.

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Rice subsidies hurt poor

Joint study says program ate up2.5% of GDP

The Philippine government’s mammoth rice-subsidy program hurts the poor people it is supposed to be helping, according to a joint study published Thursday.

The report called for reforms to the program, which ate up 2.5 percent of the 2008 gross domestic product (GDP) and turned the monopoly rice importer National Food Authority (NFA) into the largest loss-making state firm. GDP is the total value of all goods and services produced in the country in a year.

The authority has a mandate to provide low prices of the cereal, provide price support to rice farmers and smooth out price swings mainly by the “untargeted transfer of cheap, mostly imported rice to households” of the world’s biggest rice-importing nation.[Continue Reading....]