Philippines to give fresh shot to boost economy
MANILA PHILIPPINE Finance Secretary Cesar Purisima on Saturday said he viewed encouraging economic growth a key policy priority for the country’s government and central bank this year, saying there could be room for further interest rate cuts because of continuing economic uncertainty in Europe and the US.
In a telephone interview with The Wall Street Journal, Purisima, who is the key economic policy point-man for President Benigno Aquino III, also said that the Philippines’ strengthening fiscal position presents a strong argument for international credit rating agencies to continue upgrading the Philippines’ ratings.
“Inflation is not the main concern right now, but growth is,” said Purisima, pointing to weak demand for exports from the European Union as a particular source of concern. “There are factors that would argue for easing interest rates, but I leave that up to the central bank of the Philippines to decide on. I’m confident they will make the right decisions.” The Bangko Sentral ng Pilipinas, the country’s central bank, cut its main policy rate for the first time in two-and-ahalf years last month, reducing it by 25 basis points to 4.25 percent. Expectations are growing that the central bank will further cut rates in March after the rate of inflation continued to slow in January. The central bank forecasts average inflation of 3.1 percnt in 2012 after falling to 3.9 percent on year in January.
Purisima departs next week for Europe on a non-deal roadshow to drum up investor interest in the Philippines. He will also meet with representatives from ratings agencies Moody’s Investors Service, Standard & Poor’s and Fitch Ratings to present the Philippines’ case for further ratings. Fitch currently rates the Philippines one notch below investment grade with Moody’s and S&P rating the country a step below that.
Purisima said he hopes that at least some of the agencies will upgrade the Philippines to investment grade in order to recognise the improvement of the country’s fiscal position since Aquino took office in 2010.
“Last year we saw the highest ever annual increase in revenue collection, and we did that without adding any new taxes,” . Purisima said. “I think that highlights the government agenda.” He noted that financial markets already are rating the country as if was investment grade. The Philippines last month sold $1.5 billion in US denominated bonds at a yield comparable to those of European countries such as Spain and Italy, suggesting that international financial markets already are reassessing the Philippines’ place in the global pecking order as concerns over Europe’s financial health increase. The issue was heavily oversubscribed.
“Two of the three ratings agencies have us two notches below the ratings which two of them have on Indonesia. I believe we deserve a second look,” .
Purisima said. “I hope they will switch to view us as investment grade sooner than later, not just to lower our cost of borrowing, but also to attract new investors who can only invest in investmentgrade countries.”