Moody?s Investors Service yesterday kept its positive outlook on the Philippines due to a strong banking system and steady balance of payments position amid the global economic downturn.

Moody?s senior vice president Tom Byrne said in a statement that ?the Philippines? balance of payments and banking system have held up well to the global inflationary and credit market shocks of 2008, thereby placing the country?s external payments in a strengthened position to cope with the stresses likely to be encountered in 2009.?

Finance Secretary Margarito Teves welcomed the move of Moody?s, saying the government would focus on further increasing revenues to help improve the country?s credit rating.

?We are pleased with this vote of confidence from Moody?s especially since it comes amid these challenging times. We will endeavor to further increase revenues to help us improve our credit ratings,? said Teves.

Moody?s said it did not expect the country?s external debt situation to deteriorate despite a slow improvement.

Byrne said the deceleration in inflation toward the central bank?s targets of between 2.5 and 4.5 percent this year should help ease the pressure on the exchange rate and allow policy makers to ease monetary policy to help cushion the impact of the global recession.

Moody?s said a stable peso was crucial to contain budgetary debt service payments, with more than 50 percent of public sector debt denominated in foreign currencies. Limiting debt service payments will enable the government to channel more resources into infrastructure programs and fiscal stimulus measures.

The Philippines has B1 foreign and local currency government ratings, a Ba3 country ceiling for foreign currency bonds and a B1 country ceiling for foreign currency bank deposits from Moody?s.

Moody?s changed its outlook on the Philippines to positive from stable in January 2008 because of the country?s ability to demonstrate a ?remarkable degree of resiliency to the global financial and economic crises? and that it had preserved gains in recent years in improving the country?s economic, external payments and fiscal fundamentals.

The Philippines is still several notches below investment grade. An actual upgrade appears to have been derailed by the global economic crisis. A positive outlook or review on an issuer results in an actual upgrade in the ratings within 18 months, at the latest.

Moody?s said increasing government?s budget deficit as opposed to sticking to stricter targets would not necessarily reverse the improvements in the public debt.

?Moody?s believes that the country?s long-term fiscal outlook would improve with more progress in shoring up government revenues, both through tightened administration and new tax measures, several of which are now pending before Congress,? Byrne said. ?In addition, while expenditure control has improved in recent years and Treasury debt management has been skilful, these alone will not ensure fiscal sustainability.? Eileen A. Mencias