Standard & Poor's affirmed its BB- rating on Philippine sovereign debt with a stable outlook on Friday, defying market expectations of an upgrade due to revenue shortfalls caused by inefficient tax collection. But the credit ratings firm said its outlook on Philippine sovereigns could change to positive if a new Congress passes additional revenue measures.
An upgrade would cut Manila's borrowing costs. "The revenue shortfalls evident so far this year highlight this ongoing weakness, which, in the absence of further revenue generating steps, will put a question mark over the administration's ability to create the fiscal base necessary for attaining its goals," analyst Agost Benard said in a statement.
The Southeast Asian country is under pressure to root out endemic tax evasion and corruption after it missed its first quarter deficit goal by 14 percent, despite a 25-billion-peso windfall ($536 million) from selling a stake in telecoms giant PLDT.
On Friday, the Philippines said it recorded a budget surplus of 12 billion pesos in April, below last year's 17.6 billion peso surfeit, putting the full year shortfall goal in doubt. A new Congress will meet in July after elections on May 14. The government wants to balance the budget by 2008 and has pencilled in surpluses for 2009 and 2010.
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