Credit rating upgrade affirms Aquino administration’s good governance reforms

President Benigno S. Aquino III participates in the 25th ASEAN-Republic of Korea Commemorative Summit Session 1 at the Convention Hall 205 of the Busan Exhibition and Convention Center (BEXCO) on Friday (December 12, 2014). The session agenda is to review of the ASEAN-ROK cooperation and its future direction. With Summit theme: “Building Trust, Bringing Happiness,” reflecting ROK’s commitment to strengthen its relationship with ASEAN through trust, which should result in happiness for the citizens of ASEAN and the ROK. (Photo by Ryan Lim / Malacañang Photo Bureau)

MANILA — Purisima: We welcome the upgrade, but we are still a notch underrated.

The Department of Finance welcomed news of Moody’s upgrading the Philippines’ credit rating from Baa3 to Baa2 by citing good governance as a central element to unleashing the country’s growth potential.

Finance Secretary Cesar V. Purisima said, “We welcome news of yet another credit ratings upgrade as a recognition of the robust foundations we built through good governance reforms and prudent fiscal management. Four years down this road, we are growing ever firmer in our conviction that good governance is indeed good economics: this is the 21st positive credit rating action that the country has earned since the Aquino administration took office in 2010.”

Reforms in the revenue agencies has brought the Philippines ever closer to its goal of reaching 16.6% tax-to-GDP ratio, as the ratio has now improved to 14.08% for the first three quarters of 2014. Revenue collection grew 12.6% for January-October 2014, with both the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) posting double digit revenue collection growth for January to October.

Notably, the credit rating upgrade affirms the positive effects of the President’s daring program to reform the Bureau of Customs. The BOC is fast becoming one of the country’s best reform stories: for January-October 2014, collections grew 18.8% compared to the same period last year. Meanwhile, debt burden now stands at 37.3% of GDP as of end-June, a full 6 percentage point (ppt) improvement from the 44.3% figure posted in 2010, and a staggering 30.8 ppt decrease from the peak recorded at 68.

1% in 2003.

“These efforts have built strong economic fundamentals with which we will continue to fuel our positive growth trajectory. Improving revenue collection and lowering debt service have increased fiscal space to fund critical investments for our people. In just four years, good governance has freed up fiscal space to allow us to almost double our education and public works budgets, to triple our health budget, and quintuple our social welfare budget,” Finance Secretary Purisima noted.

“We believe the Philippines is still a notch underrated. There is much work to accomplish as we approach 2016: we look to comprehensive and equitable tax reform to align with our peers in ASEAN, enhancements in tax administration, the expansion of the Treasury Single Account, as well as the passage of our priority initiatives pending in Congress such as customs modernization, and the rationalization and transparency of fiscal incentives.

“We are fully convinced that continuing our economic turnaround story rests on our commitment to good governance. We take this upgrade as a reminder to government and civil society that sustaining good governance reforms is the only way to maintain and capitalize on our ever improving trajectory,” Purisima added.