PCCI: Improved rating to support infra drive
Credit to Author: TYRONE JASPER C. PIAD| Date: Fri, 03 May 2019 16:30:42 +0000
THE recent upgrade in the Philippines’ credit status would support the government’s infrastructure program, with lower interest rates on loans anticipated, according to the Philippine Chamber of Commerce and Industry (PCCI).
“It (improved status) can further bolster BBB (Build Build Build) projects in the pipeline, and correspondingly, encourage more new investments and facilitate business expansion,” PCCI President Alegria Limjoco told The Manila Times on Friday.
Debt watcher S&P Global Ratings raised on Tuesday the Philippines’ credit rating from “BBB” to “BBB+” with a stable outlook, citing as reasons the country’s robust economic growth track and the good standing of government fiscal accounts, among others.
The upgrade puts the country two notches above the minimum investment grade and one notch away from an “A” rating.
With the improved credit rating, Limjoco is optimistic that funding from loans for infrastructure projects would be more accessible, allowing more economic activities for the construction industry.
The improved rating “means better chance of loan approval at lower interest rates. This has a knock-on effect on business and the economy,” she explained.
Build Build Build is one of the Duterte administration’s flagship programs. A 10-year industry roadmap for construction was launched recently to strengthen the sector, setting spending target of between P40 trillion and P130 trillion starting in 2020.
Overall, Limjoco expects a favorable sentiment for the economy with the upgraded rating.
“Better investment grade makes the country more attractive to foreign direct investments, generate more jobs, improve incomes and boost consumer spending and corporate profits,” she said.
The PCCI chief cited the Ease of Doing Business law as a contributor to the new rating, which helped in securing “faster approval” for
infrastructure projects from the National Economic and Development Authority, the Department of Public Works and Highways, and the Department of Transportation.
This law mandates that simple business transactions should be completed within three working days, seven for complex ones; and 20 for highly technical processes.
It also mandates that transactions a government agency did not classifyshall be processed within three working days and be treated as a simple transaction.
Government agencies that fail to comply within the prescribed period will be penalized.
Limjoco also cited “government’s efforts to improve transparency in budgeting and the procurement process” and “initiatives to reform the tax regime to expand the base of taxpayers and improve tax administration.”
The recent signing of the much-delayed 2019 nation budget gained positive sentiment, as well, she said.
Investor confidence
Also on Friday, the Foundation for Economic Freedom (FEF) joined government officials in lauding the upgraded rating, but urged the Duterte administration to solve the country’s current water, power and infrastructure issues.
In a statement, the group said the improved rating would “result in increased investor confidence in the economy, lower borrowing costs for the government and the private sector, and more investment inflows.”
It urged the government to push for more reforms, saying it “should focus on agricultural growth, which had been lagging behind population growth.”
“Its weak performance had been acting as a drag to manufacturing and the other sectors of the economy, making the country vulnerable to food price shocks,” it added.
FEF also said the government “should also shore up the country’s weak export performance in order to contain the ballooning trade and current account deficits.”
“The country cannot continue to rely on OFW (overseas Filipino worker) remittances to finance its negative external trade position,” it added.
“In the meantime, the administration should also promote tourism and a stable mining policy regime in order to generate more dollars to finance the growing capital import requirements of its bold infrastructure program.”
WITH ANNA LEAH E. GONZALES
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