MANILA (UPDATE) - Moody's Investor Service has affirmed the Philippines' investment grade BAA2 rating with a stable outlook.

The debt watcher said it kept its credit rating for the Philippines because of the country's reforms to liberalize the economy, fiscal consolidation efforts, and robust macroeconomic fundamentals. The credit rating firm gave the Philippines the same grade in September 2022.

An investment grade rating indicates lower credit risks, which allows a country like the Philippines to access capital or debt at lower interest rates or lower costs to the public. 

“The passage of reforms over the past several years to liberalize the Philippine economy will support medium-term growth potential by supporting a business-friendly environment and attracting foreign investments," Moody's said. 

The rating also takes into account that fiscal consolidation will resume with the debt burden to remain higher than pre-pandemic levels but comparable to similarly rated peers over the medium term, Moody’s said. 

Moody’s said household consumption in the Philippines will bounce back in the second half of 2024 as the impact of El Nino fades. It also said that the tariff cut on rice to 15 percent from 35 percent will help ease food prices.

It also said that recovery in electronics exports, growth in business process outsourcing (BPO) revenues, and improving international tourism will also help boost economic growth.

Moody’s also said it thinks the government’s debt burden will stabilize at around 60 percent of GDP on a national government basis, and around 50 percent on a general government basis in the medium term. The debt watcher also said it expects foreign direct investments into the country to keep increasing till 2025. 

But growth may be hindered by poverty levels and uneven access to education and training opportunities on upskilling of the labor force, Moody’s noted. It also flagged the failure to pass the proposed fiscal reform bills or higher government spending ahead of the 2025 mid-term elections as downside risks to fiscal consolidation. Moody’s also noted that geopolitical tensions may hurt trade and tourism, but doesn’t expect these to worsen.

Bangko Sentral Governor Eli Remolona welcomed Moody's rating. 

"We are taking a measured approach in safeguarding price stability conducive to sustainable economic growth," he said. 

Finance Secretary Ralph Recto, meanwhile, hailed the credit rating as "another victory for Filipinos." 

"These will create more quality jobs, increase incomes, and reduce poverty incidence in the country," he said. 

The Philippines has received two "A" credit ratings from Japan-based agencies: one from Rating and Investment Information, Inc. (R&I), and another from the Japan Credit Rating Agency, Ltd. 

In June, Fitch Ratings affirmed the Philippines’ 'BBB' investment-grade credit rating and kept its stable outlook.  A 'BBB' rating means a low risk of default and adequate capacity to pay, although some unfavorable economic conditions could constrain this capacity. A "stable" outlook, meanwhile, suggests a low likelihood of a rating change over the next one to two years.

Fitch keeps 'BBB' rating, stable outlook for PH

S&P Global Ratings, meanwhile, affirmed the Philippines’ BBB+ investment grade credit rating in November 2023.

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