Moody's cuts Philippines

Moody's Investors Service said it downgraded the Philippines' long-term foreign- and local-currency ceilings and ratings owing to concerns that the large build-up in government and external debt introduces heightened vulnerability to shocks despite recent efforts by the government and legislature to enact fiscal reforms.

Moody's lowered the Philippines' foreign-currency rating for government bonds to B1 from Ba2, the long-term foreign-currency country ceiling for bonds to B1 from Ba2, the long-term foreign-currency ceiling for bank deposits to B1 from Ba3 and the local-currency rating of the government to B1 from Ba2. The outlook is stable.

Moody's said it recognizes that the administration of President Gloria Macapagal Arroyo inherited a much-weakened fiscal structure, yet progress in enacting reform is proving difficult as the president's majority coalition in Congress grapples with politically painful choices.

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