Moody’s: Growth, reforms support PH’s Baa2 rating
The Philippines’ investment grade credit rating of Baa2, which comes with a stable outlook, is supported by a “large and fast-growing economy and continued gains in debt affordability”, Moody’s Investors Service said on Wednesday.
“These positive features are balanced against low per capita incomes and, relatedly, low revenue-raising capacity compared to other Baa-rated countries,” the debt watcher said.
Moody’s, which last month retained the country’s credit rating but warned of some risks, said the economic growth was expected to stay strong over the short term given the government’s focus on infrastructure development.
”Strong domestic demand and the economy’s limited reliance on foreign sources of financing shield the Philippines from the direct impact of abrupt changes in the global macroeconomic and financial environment,” it added.
A credit analysis rated the country as “high” in terms of economic strength, “moderate (+)” in terms of institutional strength, “moderate” in fiscal strength and “low (+)” with regard to susceptibility to event risks.
The stable ratings outlook “indicates that upside and downside risks are balanced,” Moody’s said.
The debt watcher noted that rising inflation was a challenge but said that it expected this to be temporary and not due to excessive overheating risks.
“Moody’s also believes that the strong track record of the central bank in maintaining monetary and financial stability will prevail in the face of such headwinds,” it added.
A convergence in per capita incomes and revenues with those of higher-rated peers could result in a ratings upgrade, Moody’s said, while the reverse could be prompted if unabated overheating pressures threaten macroeconomic stability.
“The reversal of reforms that have supported recent gains in economic and fiscal strength, and/or the implementation of prospective changes in governance structures in a way that diminishes fiscal strength would also likely lead to a downgrade,” it added. Ed Velasco
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