Noynoy Aquino government hires Fitch Ratings to give Philippine economy a thumbs up

Incumbent Philippine President Benigno Simeon “BS” Aquino is beaming with pride now that the country has scored an “investment-grade” credit rating from Global rating agency, Fitch Ratings under his watch. You might be asking yourself, “What the heck does it all mean?” Well, it means a lot of things that some folks will never understand. This is because the credit rating upgrade will only amount to something when investors actually invest in the country and when those investments turns into profit.

Hired to rate
Hired to rate
In a nutshell, the country now has a good credit standing — supposedly. The rating upgrade is said to be a “move expected to boost investment and lift the country’s long-term growth potential.” How? Here’s a simple analogy: let’s assume that Pedro is tired of commuting. He now wants to take out a car loan from a bank. As its standard procedure, the bank will look at Pedro’s credit history and his ability to pay his debt. If his credit standing is good, his chances of getting approved for the loan is high and he might even have access to a lower interest rate. A low interest rate could allow him to manage his finances better. That is also assuming that he doesn’t decide to take out any more loans in addition to his car loan, which could spin his finances out of control.

The question is, should Pedro ask for a loan in the first place? Why can’t Pedro just work hard and pay for his car in cash? Just because he now has access to a credit line, it doesn’t mean that he should go out and take out a loan.

The same could be asked of the Philippine government. Should the government take out more loans now that the country has a good credit rating? After all, one of the things cited by the rating agency, Fitch as the reason for giving the Philippines an upgrade from BB+ to BBB- is that “the government ably managed the country’s foreign debts, which has fallen to 47% of total government borrowings, from 53% at end-2008.”

While Filipinos are still debating over who initiated the reforms that led to the credit upgrade, they seem to forget that there is a risk that if the country falls into excessive debt again, it is possible that the borrowed funds can get mismanaged yet again or could get funneled into a private account in the Cayman Islands by some government douchebag. If or when that happens, a lower credit rating will be the least of the Filipino people’s worries.

When borrowed funds meant for infrastructure projects disappear, Filipinos will have nothing to show for falling into the debt trap — there will be no new infrastructure, no money for better education and health care, nor any money to help with social services. Not to mention the obvious outcome: there will be no return on investment. In other words, borrowing money that can only get lost in the “bureaucratic maze” is not something Filipinos should be looking forward to.

Taking all the credit
Taking all the credit
As usual, President BS Aquino was quick to take all the credit for the credit upgrade. Never mind that it was crystal clear that the credit agency emphasized that it was former President Gloria Arroyo who introduced reforms that effectively improved the fiscal management of the country, something that BS Aquino is reaping rewards for at present. GMA’s VAT reform law in 2005 was said to “have made general government debt dynamics more resilient to shocks.”

However, BS Aquino stated that the upgrade was “an institutional affirmation of our sound good governance agenda”. Yes, as stated by Fitch, government borrowings were down by 47%. Let’s not forget that the reason for this was because BS Aquino put all projects on hold in the beginning of his term. In fact, he didn’t want to spend on public infrastructure projects that time, which was a move that resulted in the economy only growing by 3.2 percent in the third quarter of 2011. As mentioned before, the significant drop in growth in 2011 compared to the 7.3% growth in 2010 compelled some of the President’s critics and members of the Makati Business Club (MBC) to strongly advise him then not to put on hold public infrastructure projects and, instead, “to pump prime the economy” with government funds.

President BS Aquino it seems didn’t realize that putting a hold on infrastructure projects that were initiated by the previous government would backfire on his own administration. Some people even saw through his so-called “austerity measures” as vindictive and just a ruse to make people believe that he is unlike his predecessor Gloria Arroyo whom the President claims to have “depleted” the national budget through its alleged overspending.

What I am trying to say is this; BS Aquino’s move to put projects on hold or do nothing in his first year in office and equate that to “austerity measures” gave the impression of “sound fiscal prudence and good governance”. The fact is, it really doesn’t matter who is sitting in Malacanang right now since the remittances from the overseas foreign workers (OFWs) and consumerism fueled by it is what’s keeping the economy afloat. Both BS Aquino and GMA cannot even take credit for the economic policy of sending laborers abroad. Our dependence on remittances started in 1974, during the Marcos years. Unfortunately, the Philippine government has become addicted to the easy availability of funds from remittances.

BS Aquino doesn’t seem to realise that the influx of foreign investors will be limited by the 60/40 provision in the constitution. Not all foreign investors are satisfied having a local partner. A lot of businessmen prefer to have 100 percent control on their businesses. Removing the restrictions is one thing, but the question is: Has the situation around doing business in the Philippines improved? We might be inviting guests over without first cleaning the house. Last I heard, foreigners are still getting themselves kidnapped for ransom.

What will be BS Aquino’s next move after patting himself on the back? Since he now has access to credit, will be borrow funds to push his Daang Matuwid? Would he spend it on infrastructure, better education, health care and social services? Even if he did, these investments have low guarantee on returns. Just like cars, they depreciate in value. While improving the country’s infrastructure would be great, they can deteriorate in time when they are not maintained properly. And while investing in human capital through education, health care and social services is excellent, it can only go so far until the funds dry out. Implementation in giving Filipinos access to better education, health care and social services can also be tricky. Laws would need to be introduced to address it. Sadly, the ballooning population can easily write off any improvements achieved in those things.

For better return on investment, BS Aquino should also invest in manufacturing, agriculture and mining. They provide jobs and can teach Filipinos new skills. It’s about time Filipinos make a name for themselves in something aside from exporting labor. If Filipinos use borrowed funds for ventures that will result in long-term economic programs, they can be self-sufficient and won’t have to rely too much on foreign investors for jobs or income.

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Post Author: Ilda

In life, things are not always what they seem.

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49 Comments on "Noynoy Aquino government hires Fitch Ratings to give Philippine economy a thumbs up"

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Gogs
Member

When I was in high school which was decades ago, there was this family who sponsored an award for graduating students. The first year they did that. The criteria they specified just happened to match their graduating daughter’s skill set. I can see a parallel with that mentality.

Libertas
Guest

ofw remittances – 24 billion dollars a year
fdi ( foreign direct investment ) – 1 billion dollars a year!

p-noy can try to fool the filipino people but not international investors.

eduardo
Guest

Tama ang sinabi ng ating pangulo noong Easter. Ang pagbangon ni Hesukristo ay sumasalamin sa pag-asang pinanghawakan ng bawat Pilipinong makailang beses nalugmok sa kalbaryo ng korupsyon at katiwalian.

traffice2000
Guest

Tama naman yung sinabi mo na sinabi niya(BS) yun lang yung nagsasalita eh hudas barabas hestas.

ChinoF
Member

Even the devil can quote the Bible.

Lord Chimera
Guest

As ChinoF said “Even the devil can quote the Bible” and also that’s blasphemy.

StopDrinkingVirility
Guest

That’s totally nonsense. As a Bible-believing Christian, that’s very insulting.

Pahiwatig na ang problema ay nag umpisa kay Arroyo at perpekto ang pagkalagay at implemento ng constitution ng 1987 at kahit noon pa ng 1942.

And then eduardo goes nuts since he can’t counter this… 😛

domo
Guest

God is now sticking His middle finger to both your precious pwesident and his alipores like you.

Johnny Derp
Guest

You should apply some ICE, eduardo since you just got BURNED.

Your tears are very delicious.

TROLL HARDER

traffice2000
Guest

Mabuhay ang mga OFWs! Mabuhay BSP! Mabuhay si PGMA! Ma…bu…hay…si…. P…next time nalang 😉

It will be a slap on their face if they give credit to PGMA and all the OFWs knowing them but they cannot hide the truth; Fitch rating review was on the internet and everybody can read it.

Libertas
Guest

8 out of 10 filipinos are happy.
10 out of 10 north koreans are happy.
Poverty and unemployment is the new luxury

Nestor
Guest

FDI for 2012 was US$ 2 Billion. I didn’t know that there are so many uninformed people in this blog.

Libertas
Guest

Philippines net FDI falls in 2011 to $1.26B – world bank

domo
Guest

That’s it? Big deal. Our country will never be like Hong Kong or Singapore with that puny FDI you’re showing off. FAIL.

eachhisown
Guest
How can the Philippines be like Singapore, Malaysia or Hong Kong? First of all more and more Filipinos’ mindset is getting more are more parasitic. Starting from the politicians who are vulgar examples in breaking the law. They, plus most government officials, and employees are without shame at all in extorting money from the citizens who need the services from the government through permits, licenses and even clearances. The ordinary people are also salivating while listening to the stories of government personnel about how they extort money from the people. Because they themselves dream of getting into government employment and… Read more »
Bangkaw Itomon
Guest
Indeed, it was GMA who initiated the economic reforms which steered the Philippines from the world’s recession making the Philippines grow to 7.6%. However, BSA also had achievement of its own aside from GMA by building on that foundation which lead to the Fitch Ratings. Second, it was because of the Philippines overseas workers remittances and not having to rely on foreign borrowing, like so many other countrie, to bridge the gap of its exports to imports, that it helped plug the country’s deficit and amassing 80 billion dollars more in currency reserves, which was better than GMA’s initial success:… Read more »
joeld
Guest

Such a long rant just to say that “BS Aguino isn’t so bad after all.”

Harap-harapan ka nang ginagago ok lang sa iyo? Or maybe you just had too much do drink?

StopDrinkingVirility
Guest

Just accept the fact that you are indeed… a TROLL. 😀

Glenn
Guest
The up-grading of the Philippines to ‘investment grade’ BB+ is about the marketing of ‘investment grade’ securities and/or bonds. The gov’t. is now internationally recognized as a country that can offer, on an international level, securities and bonds to people/governments/pension systems around the world that are willing to buy them (termed ‘sovereign debt’) at the interest rates set by the Bangko Sentral and the promise that they will pay up when presented for encashment when the bonds/securities mature. it is a methodology of gov’t.s around the world and a credit rating approval from Fitch/Moody’s/G&S is essential or no one will… Read more »
Ben Gerodias
Guest

But GMA’s 7% happened every presidential election, 2004 and 2010, where there is heavy election spending. In 2010, Villar’s heavy spending, the highest among the presidential candidates plus the OFW’s remittances in 2010 pushed our GNP above the 7% mark. But after every major election, we came to earth again, the 7% or above is not sustainable, nothing to crow about.

Bangkaw Itomon
Guest
Yes. Thats true. GMA may have her flaws but to take away what she did right in economics is plain politicking. I give a lot of credit to BSA who has done a fantastic job in improving on the economy. I dont think this is just “chamba,” but a well thought out process of his administration in that we are now seeing the results. The Philippines does not rely on foreign borrowing typical of other countries because OFW remittances have contributed to 8.6% to bridge the gap. The Philippines is now a net creditor to the world instead. Thats a… Read more »
Johnny Derp
Guest

Haba ng rant mo para lang sabihin na okay si panot pero pasensyahan nalang, walang maniniwala sa sinasabi mo.
Everyone can already see that aquino only credit grabs and does absolutely NOTHING for the economy and yet he enriches his corrupt KKK.
Don’t even try to rebut that this all happened under his regime when in fact it was gloria that made the necessary choices to uplift our economy. The economic gains today were all thanks to the previous admin not to your noynoying, lazy president.

TROLL HARDER

StopDrinkingVirility
Guest
Lies. The improvement of the economy is not of BS Aquino, but more like of GMA’s continuous use of Keynesian economics. “We can do the same, and looks like we are headed to it, because the early indicators seem to be similar. I am bullish. We need to attract foreign companies to build their products in the Philippines.” Another set of filthy lies. How can we attract more foreign investors if we still have flawed economic policies? “We have to amend our short sighted “nationalist laws,” by not being overly liberalising our economy, but to use every tool that protect… Read more »
Ravslaw
Guest

Pabayaan na lang po sina Imelda, Bongbong at Imee? At sina GMA at Mike? At mga Euro Generals? At mandambong na din?
We get more of the misconduct we don’t punish. Or the conduct we we reward. Skinner. Even kids know these.

StopDrinkingVirility
Guest

‘Those who have no sin should cast the first stone.’

Sorry, but even kids became gullible and like you, being brainwashed by what the biased media tells them.

It’s really hilarious for people like you to act like GIRLY MEN and whine about putting away one corrupt politician and not realizing the full lengths of the corruption. But what do I expect from a ignorant Pinoy pleb like you to know?

You’re more of a skinner because you’re a… TROLL. 😛

Marlowe
Guest

For the mean time, those who are favoring BSA have no choice including me. All those interested in his position are proven crooks or proven potential crooks. So, good luck mga kababayan. Pagtiti-isan na lamang natin. Between evils, he is better than the most but that betterment is temporary until May 2016 and thereafter brace for a more mandarambong.

Marlowe ….

StopDrinkingVirility
Guest

PNoy is a bigger mandarambong. You never realized it. But we do…

TROLL. 😛

Oh yeah, onion-skinned people are soooooooooooo annoying. 😀

Deuxieme
Guest
I don’t really give much thought on who should get a lion’s share of the credit for this achievement. I just wish to correct the perception na getting a sovereign investment grade for the Philippines is all “media/propaganda” material lang. In the finance/business world, this is a critical milestone. Let me explain further: Source of capital: unknown to most, the Philippines’ credit rating is not just for the country’s debt. It also serves as a ceiling rating for its domicile companies. For example, companies which are MNC-comparable such as SMC, SM and Ayala, etc could have been rated (on standalone… Read more »
benign0
Admin

Indeed, that’s all correct. So the issue here is the way the credit upgrade is being pitched and spun as a momentous thing that validates a specific government. The key words here, as you pointed out, are this development’s main relevance is to those who employ capital as it will “improve the performance of the Philippines’ securities market which will enrich shareholders”. That is where the immediate effects will be felt. Whether those effects will trickle down to the majority in the form of new employment opportunities remains to be seen.

Ravslaw
Guest
Fyi. It is interesting to note that, aside from Fitch ( deducting from Ricky’s prior comment, was a “fake” rating agency), another European entity, Barclays (as mentioned in the report below, recently fined for price fixing and manipulating the $300 trillion securities market), painted a very rosy picture for the Philippines’ upcoming investment climate. Are the posturings of these two foreign financial entities “real” data-driven, or as alleged, “fake” data-driven? Now exposed, it begs the question: Are these two “fakers” in conspiracy, i.e., setting the stage, creating a “fake” market in the Philippines for a kill very soon? If they… Read more »
eachhisown
Guest
PLEASE HELP! To be more realistic and not just like bunch of professing intellectuals, why don’t we divert our minds and some spare resources in spreading to all Filipinos that most politicians and most government leaders, and even some employees are the ones responsible in not only sucking the country’s resources but corrupting the cultural mindset as well. Let’s unite in disseminating to all people that we can reach that the annual national budget keeps on evaporating without any significant improvements in the national infrastructures (like roads, bridges, electrification, computerization in all government agencies and branches, etc.) and facilities. We… Read more »
joeld
Guest
“Getting the message through” is not as simple as it sounds. People like eduardo (if you visit this site often, you’ll know the likes of him) have the mentality which this site has been heavily opposing. If you visit and try to comment on the more mainstream sites, you will be mugged by other commentors with the same way of thinking as eduardo’s, and add to that, ang tatapang nila, sobrang dami pa. And they are really that shallow that they take it as their victory trophy when you shut up. As for me I just comment on mainstream sites… Read more »
eachhisown
Guest
That’s the point I’m trying to get through to the minds of the majority of Filipinos who’s culture are sinking much deeper into instinctive corruption and thievery and abuses. Most Filipinos are raised up to a family where taking or stealing the properties of their parents and siblings are being ignored or tolerated, which implant into their mindset that it is legally normal and even noble. Also, they are raised up that throwing garbage, pissing and making s**t anywhere is acceptable and having no consequences at all. Most Filipinos don’t even understand what is the correct right of way when… Read more »
Dr
Guest

The Same ratings agencies that cooked the mortgage books in 2007/2008, give me a break. Who on earth wants to invest in closed corrupt ecomony, where you can’t own property or get real bank accounts and Is filled with mindless bureacrats and ridiculous rules. The phils is a body shop for overseas and always will be

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