GLOBAL debt watcher Moody’s Investors Service considers the passage of the first package of the government’s tax reform program as credit positive because it will address the country’s weak revenue generation.
In a report Monday, Moody’s vice president and senior credit officer of the Sovereign Risk Group Christian de Guzman said the TRAIN bill was also crucial to maintaining narrow fiscal deficits since the administration of President Rodrigo Duterte intended to increase infrastructure spending over the course of its term in government through 2022.
“The TRAIN bill will boost revenue and improve the government’s debt affordability, as measured by interest payments as a share of revenue. Philippine government revenue has improved by nearly two percentage points of GDP to 15.2 percent of GDP in 2016 from 13.4 percent in 2010, largely because of administrative measures that improved tax compliance,” de Guzman said.
“However, the Philippines still collects less revenue than most Baa-rated peers, higher than only Indonesia (Baa3 positive), whose revenue was 12.5 percent of GDP in 2016, and Colombia (Baa2 stable) at 14.9 percent…,” he said.