November 27th, 2024
S&P Global Ratings directly attributed their recent upgrade of our credit outlook from ‘stable’ to ‘positive’ to “improved assessment of institutional and policy settings in the Philippines.” I attribute this to key policy reforms to expand our fiscal space, in the case of the long-overdue Digital Economy Taxation Act, and the expansion of our investor base through CREATE MORE.
In other words, this development is directly attributable to President Marcos’s responsible approach to fiscal policy, and Congress’s efforts to enact fiscal reform. It is also due to President Marcos’s harmonious relationship with both labor and business, and to his reaffirmation of our role in international markets and in the multilateral sector.
I believe that the Big 3 will eventually upgrade our rating to A-levels once we pass fiscal reform in mining and the Capital Markets Efficiency Promotion Act, which will also expand our capital base. The Senate has already advanced both measures, and I think we might agree on versions for both before Christmas.
We enter 2025 with even more favorable macro conditions: low inflation, stable employment levels, gradually declining interest rates. So, more upgrades are coming.
The upgrade should reduce our average government borrowing interest rates. Every rating upgrade tends to reduce rates by as much as 0.25 basis points compared to baseline. An outlook upgrade tends to do something similar.
Every rating upgrade would save the Filipino taxpayer as much as P29 billion in interest payment costs in the budget. That is money for as many as 1,160 classrooms, about 30 new provincial hospitals, and as much as 1,414 kilometers of concrete roads. These are very real impacts on the Filipino family.
On the part of the House Committee on Ways and Means, where the Constitution has left the role of originating tax reforms, I assure you that there will be no lame duck period, and we will work until the very last day of this term.