Government economic managers said Wednesday the decision of Moody’s Investors Service to maintain the Philippines’ debt rating at investment grade reflects the economy’s robust growth.
Moody’s on Tuesday maintained the Philippines’ sovereign credit ratingat “Baa2,” a notch above the minimum investment grade, with a stable outlook.
Outgoing Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., who will end his second six-year term on July 2, said the decision of Moody’s spoke well of the favorable path the Philippine economy continued to tread, partly on account of the price and financial stability that came on the back of prudent monetary policies and bank supervision.
“The banking sector, which remains strong and stable, will also continue to support the increasing potential output of the economy as it provides financing for growing investment and consumer demand,” Tetangco said.
Finance Secretary Carlos Dominguez III said the favorable credit rating from Moody’s was a “telling mark of the Duterte administration’s heightened efforts to sustain the robust growth of the Philippines by attracting more investments and, more importantly, to make it a more inclusive one by raising spending on infrastructure and human capital.”
Dominguez said financial institutions in the Philippines and abroad lauded Malacañang’s commitment to further economic reforms. The commitment was shown in part by the House of Representatives’ recent approval of the first package of the Comprehensive Tax Reform Program, which President Duterte had certified as a priority measure.
Moody’s said the affirmation of the country’s Baa2 rating and the assignment of a stable outlook
balanced positive and negative factors.
The debt watcher said on the positive side, the Philippines’ economic performance was expected to remain strong while debt consolidation would continue and foster further convergence of key fiscal metrics versus corresponding peer medians.
“The Philippines’ Baa2 rating reflects high economic strength that balances the country’s large scale and rapid growth against low per capita income relative to peers. Our assessment of its institutional
strength incorporates a long track record of sustaining macroeconomic and financial stability, despite weaker Worldwide Governance Indicators as compared to other investment grade countries,” it said.
Moody’s, however, said the Philippines, like any sovereign, was confronted with some risks. It cited the conflict in Marawi City as something to monitor.
It also cited the emergence of protectionist policies in advanced economies, which it said could dampen revenues of the currently vibrant Philippine business process outsourcing sector.
Dominguez said the Duterte administration was on top of the situation in Marawi and that the impact of the conflict was expected to be minimal and contained to that city in Mindanao.
“The imposition of martial law in Mindanao, which is allowed under the Philippines’ Constitution and which has won support from the people, the business community, and the Congress, shows that the government is doing what is required to address this situation within the bounds of the law. This decisive action was taken to insulate the vibrant domestic economy from the conflict,” Dominguez said.
