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Fitch Ratings: Aquino governance weak

Even as President Aquino boasts that under his leadership the country’s credit status has been upgraded, Fitch Ratings’ actual statement as well as its data shows that the upgrading has nothing to do with improved governance.

“Governance standards, as measured in international indices such as the World Bank’s framework, remain weaker than ‘BBB’ range norms, “ Hearst Corp.’s Fitch Ratings said in its statement on its upgrading of the Philippines’ long-term debt issues to BBB-, or “entry-level” investment grade.

This is supported in the data contained in the “Sovereign Data Comparator” Fitch issued on March 28. According to the Fitch comparator, the Philippines’ grades in four of the five governance parameters (see chart) are even below the median for “B/C/D” nations, or those whose credit ratings are speculative, highly risky, or rock-bottom zero.

To better illustrate the weakness of the Philippines’ governance under Aquino, I have included the comparable indices for Greece, a nation quite obviously in political turmoil and slow-motion economic collapse, and whose Fitch rating is “CCC,” the second-worst notch to D, or countries which have defaulted on their loans and with little prospect of recovery.

In “ease of doing business”, the country’s index is at 26—lower than the 38 average for the B/C/D countries and way behind the 58 for Greece.

While Mr. Aquino has been crowing about his anti-corruption campaign, the Philippines’ grade on this measure under his watch is 23 points, lower even than the 30 median of B/C/D countries, and way down the 56 index for Greece, where there have been recently high-profile reports of graft. The rule of law in the Philippines was graded at 35, below that of B/C/D countries and again way behind Greece’s 67.

What is quite alarming is that in the parameter of “political stability”, the country’s index was 9, the third lowest in the Fitch’s listing of 113 countries. Going by this parameter, we are more politically unstable than Egypt (11.8) and Kenya (9.9). Only two countries are in worst shape in terms of political instability than our country: Lebanon (6.6) and Nigeria (4.2). Does Fitch, with all its US intelligence contacts, know something we don’t?

Fitch Ratings obviously would not be fooled by the Aquino-controlled press trumpeting his tuwid na daan rhetoric, since any objective analyst would see that good governance isn’t achieved overnight nor through the persecution of the former administration’s officials. As Fitch Ratings in its early June 2012 analysis pointed out: “It will likely take time [for a governance reform program] to feed through to the sovereign credit profile.”

Fitch in fact totally did not refer to any gains in Aquino’s much-vaunted good governance reform as a factor for its upgrading of Philippine debt-papers.

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Its so disgusting that Mr. Aquino is so ignorant or so hateful of his predecessor so as to lie—in his Easter message, for Chrissake—that under his watch the country has risen from the dead “just as Jesus Christ resurrected.”

The truth is, which one can easily verify not just from government statistics but also from those of the World Bank, that the country during President Arroyo’s regime had the highest average growth rate for GDP and GDP per capita, as well as the lowest rates of inflation and peso depreciation. These four are the most important measures of a country’s economic performance.

What Aquino has been doing is repeating his big lie that growth slowed down in the last years of Arroyo’s watch because of corruption (unproven after three years) and economic mismanagement. That’s pure hogwash. GDP growth decelerated from its 6.6 percent peak in 2007 to 4.2 percent in 2008 and to 1.1 percent in 2009 because of the global financial crisis, which was worse than the pre-war Great Depression.

Even the country’s growth rate of 1.1 percent in 2009 is remarkable since those of our neighbors contracted under the pressure of the global crisis. For East Asian countries, for instance, GDP declined by 0.3 percent in 2009.