Political developments ahead of May elections in the Philippines could prompt a credit rating downgrade if they worsen the economy's condition, but a change is not inevitable, rating agency Standard & Poor's said on Thursday.
S&P currently has a rating of BB on the country's foreign currency sovereign debt. It last changed the Philippines' rating by lowering it by one notch last April, citing a rising debt burden.
"If we do think there is a candidate out there who has a significant rating impact and we see that he or she is going to win then we can react," Ping Chew, S&P's sovereign ratings director for Asia ex-Japan and South Korea, said at a briefing.
He added a downgrade was not inevitable.
Markets have been worried that S&P's current visit to the Philippines might herald a downgrade of its current rating, which is already two notches below investment grade.
Rival agency Moody's Investors' service cut its sovereign rating on the country by one notch to Ba2 in January - also two notches below investment grade - and maintained its negative outlook.
S&P has a stable outlook on the Philippines.
Investors have been unnerved by the prospect that film star Fernando Poe Jr, a novice in politics, could win May 10 elections and replacing President Gloria Macapagal Arroyo.
Arroyo is a trained economist, but her administration has made limited progress towards controlling a yawning budget deficit.
Chew said the government needed to take "drastic" measures if it was to meet its target of balancing its books by 2009.
So the budget deficit could be a trigger, depending on the circumstances.
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