Politics almost always a b*tch

“At a time when traders were expecting a bull run up to the holiday season, the buoyant mood was deflated as the squabble between the two top officials of the government escalated.

The country’s march toward economic glory is again threatened by an internecine feud that amounts to nothing to most Filipinos. Economists are shaking their heads over destructive politics again rearing its ugly head just when the country is about to leap and join its neighbors as global economic power centers.

S&P Global Ratings recently revised the credit outlook on the country to positive, which is a step towards an “A” sovereign rating among major credit watchdogs.

The Philippines’ long-term foreign currency debt rating is currently at BBB+, a notch below A- but it upgraded the outlook to positive from stable, citing the country’s fiscal reforms, improved infrastructure, and policy environment that helped the growth momentum over the past decade.

At the moment, the Philippines has clinched two A ratings from Japanese agencies.

It has an A- from Rating and Investment Information Inc. (R&I) and likewise from the Japan Credit Rating Agency Ltd.

The rating agencies have noticed the Philippine economy growing at one of the fastest clips in the region, which is a huge achievement considering that Southeast Asia or the Association of Southeast Asian Nations (ASEAN) Economic Community is replacing China as the global economic center of gravity.

Based on the R&I scale, the Philippines is ranked with Thailand (A-, stable) and is a notch lower than Malaysia (A+, stable).

Vietnam has a lower grade at BBB than the Philippines but it is aggressively rising as another regional star after it showed a fiscal surplus of 5.8 percent of gross domestic product against the Philippines’ budget deficit of 4.5 percent.

At a time when traders were expecting a bull run up to the holiday season, the buoyant mood was deflated as the squabble between the two top officials of the government escalated. Traders are now saying that caution might dominate sentiment for local equities, as investors’ attention might be focused on local political headlines.

An A grade for the country will mean, among other things, reduced government borrowing costs that would benefit government spending mainly on infrastructure buildup. An upgrade would mean as much as a 0.25-basis points reduction in borrowing rates from the rates the country now secures, or savings of P30 billion in interest payments yearly.

In welcoming S&P’s improved outlook, economic managers, in a statement, revealed an underlying worry over recent events.

“The economic managers — the Special Assistant to the President for Investment and Economic Affairs, the Finance Secretary, the Budget Secretary, and the National Economic and Development Authority Secretary — stressed that the Philippines is determined to achieve an A rating and the administration is ensuring that the transformation of the economy will not be set back by political challenges,” the statement read.

“The economy has proven time and again its resilience against both domestic and external challenges, whether arising from natural disasters, geopolitical risks, election cycle tensions, global or regional financial crises, supply chain gaps abroad, cybercriminal activities, and other crises,” it added.

Reforms under President Ferdinand Marcos Jr. were credited for the S&P’s positive forecast. The country’s on-track fiscal consolidation plan, as well as the recent passage of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act and the Public-Private Partnership Act are being recognized, according to the economic managers.

The country has periodic elections where the will of the people is obtained and which should be respected.

Based on what the protagonists have indicated thus far, the agenda appears to intersect with providing a clean government without the corrupt practices that had always impeded the country from achieving its full potential. Any acts or efforts outside the electoral process should be avoided and recalcitrants must be held accountable.