The Philippine Online Chronicles

A New York-based credit agency said Wednesday that clear contender for the presidency Benigno “Noynoy” Aquino III needs to make clear his economic and fiscal policies in the next few months.

Moody’s Investors Service senior vice president Thomas Byrne said in their special comment on the recently concluded elections, the Philippines Election Commitment, that Aquino’s clear and apparent victory sets a favorable tone for the credit fundamentals of the country and removes the undercurrents of illegitimacy which hamstrung the policy agenda of the Arroyo administration.

Byrne, however, criticized Aquino’s platform, which he said was heavy on rhetoric but light on substance.

"Aquino ran on a platform of transformational leadership that was heavy on rhetoric, but light on substance. The incoming administration will thus need to remove ambiguity on its economic and fiscal policies in the months ahead to shore up further the government’s credit fundamentals," Byrne said on Aquino’s platform.

Aquino said during the Makati Business Club general membership meeting in January that good governance and the drive against corruption are critical components to his economic strategy.

He said he will encourage free and fair competition in business, streamline the process of setting up business and transactions, curb smuggling, and reform the tax administration process.

Aquino wants to lower tax rates and improve tax collection. He said that improving tax collection by even two percent will fix half our revenue problem.

On solving the problem of employment, Aquino said in his interview with Blog Watch early February that concentrating on education will improve health and employment. We cannot defeat poverty without improving the education cycle and investing more in education, he said.

Philippine government debt also concerns Moody’s since it is vulnerable to swings in interests, exchange rates, and shocks against business shifts and political confidence.

Byrne added, "Our upgrade of the Philippines’s rating in July 2009 was prompted by country’s strong external payments position and stability in the banking sector. We expect both of these factors to continue to provide support to the Philippines’ rating."

"Our concerns continue to center on whether the new administration can arrest the trend slippage in revenue performance, which was exacerbated by the downturn in macroeconomic conditions during the global crisis, stalled reform measures, and the passage of revenue-eroding ones," he said.

Moody’s projects the country budget shortfall at 3.9 percent of GDP this year, and Byrne said that "signs that the new administration has the will and the means to get back on a path of gradual fiscal consolidation would be a positive credit development."