MANILA—Credit ratings firm Moody’s Investors Service on Wednesday said postponing debt payments even during the COVID-19 crisis would be “not forgivable” and would “equate to a default.”
Christian de Guzman, Moody’s senior vice president, said a country that delays the payment of interest or principal to private sector bondholders will result in a credit downgrade of the country.
A senator earlier proposed that the government postpone debt payments and use the money it saves to finance subsidies to poor Filipinos. The Finance Department, however, dismissed the proposal, saying this would affect investor confidence in the Philippines.
De Guzman, meanwhile, said the Philippines still had “fiscal space” to finance measures to contain the spread of the new coronavirus as the country’s fundamentals remained strong.
However, he also said that this was premised on the scenario that the country and the world would be able to contain the spread of the virus by the second half of the year.
De Guzman also said that Moody’s may need to revise its growth forecast for the Philippines again, after already revising it thrice this year.
Moody’s originally forecast the Philippines to grow by 6.2 percent this year, this was lowered to 5.4 percent, and then 2.5 percent in its last forecast.
De Guzman said that the 2.5 percent projection did not take into account the widening of the enhanced community quarantine beyond Metro Manila. All of Luzon has been locked down since March 17.
“So there's definitely a certain curtailment of activity that has not yet been reflected in our forecast,” de Guzman said in an interview with ANC.
The Philippines was nearing its first “A” credit rating, before the pandemic struck.