Moody's affirms RP’s positive outlook

Agence France-Presse

Posted at Feb 12 2009 07:19 PM | Updated as of Feb 13 2009 03:19 AM

Moody's Investors Service said Thursday it has affirmed its year-old positive outlook on the Philippines' sovereign debt, citing its "remarkable degree of resiliency" amid the global credit meltdown.

A Moody's statement said "the Philippines has so far demonstrated a remarkable degree of resiliency to the global financial and economic crises, and has largely preserved gains achieved in recent years in improving the country's economic, external payments and fiscal fundamentals."

The US-based agency has a B1 grade, two rungs below investment grade, for Manila's foreign and local currency government ratings and Ba3 country ceiling for foreign currency bonds and B1 country ceiling for foreign currency bank deposits.

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

Its growing capacity to service its debt "will pause but it may not deteriorate," the rating agency said.

This, along with inflation easing towards the central bank's 2.5-4.5 percent formal target range in 2009, "should help ease pressure on the exchange rate this year and provide the central bank with additional scope to relax policy to cushion the effects of the global recession," said Byrne.

A stable peso is crucial to contain debt service payments since more than half of public sector debt is denominated in foreign currencies, it said, allowing the government to channel more money to infrastructure programs and "fiscal stimulus measures."

Finance Secretary Margarito Teves welcomed Moody's ratings action, which he described as a "vote of confidence" amid challenging times.

"A key concern will be how overseas workers remittances hold up," Byrne said.

The cash transfers, which amount to 10 percent of the gross domestic product, "may decline in 2009," he added.