By MAX ESTAYO

Standard & Poor’s Rating Agency said yesterday the ‘BB-’ stable outlook credit rating for the Philippines will hold for the moment while it waits for further progress in revenue generation.

"The rating still holds until we finish with the internal review and communicate any action on the ratings," Agost Benard, associate director for sovereign ratings of S&P, said in a press briefing yesterday.

The country’s sovereign rating is three notches below investment grade.

While there has been significant headway in the fiscal sector, Benard said the government needs to increase its revenue-generating capacity to get a favorable action in the country’s rating.

Benard said "revenue base remains fundamentally insufficient."

"What I would like to see is for revenue collection to improve to the extent that fiscal consolidation and debt reduction can be maintained and for spending to be supported," the Singapore-based credit analyst said.

How to improve revenues, that’s another question. Revenue agencies have to improve performance and administration. Also, collection efficiency has to improve," Benard said.

Benard said the passage of pending bills in Congress will be credit positive.

"Legislation initiatives that have revenue implications, if these come to pass, is positive," he said.

Benard said given the headway, the "task" for the government is to "consolidate" and "entrench" the gains so it doesn’t "regress to the deficit and increased borrowing."

"Now that you’ve got the budget balanced, you’re seeing the positive effects liked increased infrastructure spending and investors’ confidence."

Benard said the current political turmoil will be risk to the ratings only insofar as it affects policy on fiscal reform implementation.

He said the political uncertainty, which is already factored into the current rating, is not more than what the rating firm has anticipated.

"As far as the Philippines is concerned, with respect to the current flare-up or political noise, it’s not in excess of what’s already factored into the ratings," the credit analyst said.

"The political uncertainty, which has been for a long time a feature of this economy, tends to affect policy making but the current events are not something to change our view," Benard said.

Benard said the government has made significant achievements in improving the country’s macroeconomic fundamentals and boosting external liquidity, which is good for the ratings.

Supported by privatization, Benard said the government is likely to balance its budget this year, after being in deficit since after the Asian crisis.

"For the year ahead, to the extent that the government has assets to privatize is encouraging. All in all, the balanced budget target is achievable," he said.