Moody's affirms Philippines Baa2 ratings with 'stable' outlook

Jessica Fenol, ABS-CBN News

Posted at Sep 19 2022 10:27 AM | Updated as of Sep 19 2022 10:45 AM

MANILA - Moody's Investor Service has affirmed the Philippines Baa2 ratings with a stable outlook, citing its capacity to meet external debt payments, policy continuation and strong recovery from the COVID-19 pandemic.

In a report, Moody's said the country had retained fundamental strengths such as the stability of its banking system despite the peso depreciation. The peso weakened to an all-time low of P57.43 to $1 on Friday but is expected to gain from the increase in seasonal remittances this quarter. 

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

Moody's added that the policy continuity and commitment to reform seen following President Ferdinand Bongbong Marcos Jr's win in last May's election assure gradual fiscal repair. It also noted the significance of the economic team's medium-term fiscal framework, which includes lowering the debt-to-GDP ratio and the continuation of ongoing infrastructure projects, among others. 

"The rating action is driven by Moody's view that the challenging global credit conditions will not derail the Philippines' ongoing recovery from the coronavirus pandemic, although the severity of the pandemic shock has led to an erosion in the rating agency's assessment of economic strength," the credit rating service said. 

"In Moody's view, the rebound in economic activity since mid-2021 has been strong and will be resilient to the current challenges posed by the turn in global credit conditions over the near-term," it added.

In addition, the Philippines is also not significantly exposed to Russia. Its domestic market also supplies stable inflows from remittances, it added.

Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla said in response that “this affirmation will support the sustained recovery of the domestic economy.” 
 
“The BSP continues to have the necessary monetary policy tools to address the current challenges of tighter global financial markets and volatile exchange rates and ensure our return to a target-consistent inflation path,” he added. 
 
Moody's, however, noted that the prolonged mobility restrictions, including the delayed reopening of face-to-face classes, have posed economic scarring which could cut potential growth if left unaddressed. 

The World Bank and other organizations have flagged the country's learning crisis due to the pandemic, exacerbated by the temporary shutdown of face-to-face classes. In-person classes is currently being rolled out nationwide. 

Nevertheless, the economy has sufficient momentum to support a 6.6 percent gross domestic product (GDP) growth for 2022 and 6.2 percent for 2023, Moody's said. 

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