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Thursday, November 27, 2003
RP set for downgrade on political uncertainty: Moody’s
MANILA—Moody’s yesterday placed on review for possible downgrade the Philippines’ long-term foreign and local currency ceilings and ratings amid heightened political uncertainties.
The decision came hours before Philippine movie icon Fernando Poe Jr. announced he would run for president, posing possibly the greatest threat to President Arroyo’s chances of winning a second term next year.
The markets are expected to react negatively to the candidacy of Poe, a high-school drop-out who has never held public office and closely linked to deposed president Joseph Estrada.
Pro-reform
Despite her apparent inability to reign in corruption, Arroyo is still seen as pro-reform by the market based on her performance, analysts say.
Moody’s Investors Service said heightened political uncertainties had begun to have adverse consequences for the government’s financial position and the overall economy.
Its rating review affects the Philippines’ Ba1 foreign currency rating for government bonds and long-term foreign currency country ceiling for bonds and the Ba2 long-term foreign currency ceiling for bank deposits as well as the Baa3 local currency rating.
Moody’s has had a negative outlook on all of the country’s long-term ceilings and ratings since September.
The global rating agency’s review will include the resiliency of the external payments position and Arroyo’s ability to maintain fiscal discipline.
“In view of the tensions that have accompanied political cycles in the past, the nation’s fiscal policy could be handcuffed and capital outflows become more volatile as May’s presidential election approaches,” Moody’s said.
It said the status of Philippine foreign currency ratings would depend on the country’s ability to maintain an adequate level of strength in the country’s external performance and payments position.
Last week, Finance Secretary Jose Isidro Camacho resigned, saying he did not want to be dragged into the intense political climate up to the May 2004 presidential elections.
Crisis
Arroyo, who this month averted a constitutional crisis following a failed opposition-led bid to impeach chief justice Hilario Davide, has been faced with crisis after crisis in recent months.
The latest problem to afflict her is kidnappings involving largely the Filipino-Chinese community, who are among the top business leaders.
Exports have languished this year, reducing the current account surplus and augmenting pressures on the capital account in the balance of payments. Foreign investment inflows were on a downward trend even before the recent political disturbances. (AFP)
(November 27, 2003 issue)
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