MANILA (UPDATE) – Global credit rating firm Moody's Investors Service has upgraded the credit rating of the Philippines and gave it a stable outlook.
Moody’s adjusted the country’s rating by one notch to Baa2, a notch above the minimum investment grade rating of Baa3.
The rating firm said the key drivers for the upgrade are the country’s ongoing debt reduction, aided by improvements in fiscal management; continued favorable prospects for strong economic growth; and limited vulnerability to the common risks currently affecting emerging markets.
“The first driver of the upgrade is the decline in the Philippines’ debt burden, which has coincided with structural improvements in fiscal management. Administrative reforms in the key revenue-collecting agencies -- most recently in the Bureau of Customs -- have led to revenue growth in excess of nominal GDP growth for a fourth consecutive year,” Moody’s said.
"At the same time, budget transparency has been enhanced, in part by a mix of court-mandated reforms and procedural changes, although these developments have temporarily weighed on public spending. As a result, the Philippines' fiscal deficit remains narrower than that of its rating peers," it added.
Moody's also upgraded the government's foreign currency shelf rating to Baa2 and the ratings for the liabilities of the Bangko Sentral ng Pilipinas (BSP) to Baa2. The outlook on these ratings is stable.
"While we expect other measures related to the country's public indebtedness and debt affordability to improve over the next two years, the corresponding peer medians continue to erode," Moody's said.
It added that continued favorable prospects for strong economic growth and limited vulnerability to the common risks currently affecting emerging markets were also key drivers to the upgrade.
BSP Governor Amando Tetangco Jr. welcomed the credit rating upgrade, which came even as the global economy remains fragile and a slower than expected gross domestic product (GDP) growth in the third quarter.
“The latest credit rating upgrade is a recognition of our efforts to keep the Philippine economy resilient amid constant challenges posed by the external environment. Contributing to this resiliency are the country's comfortable external liquidity, strong financial system, and a favorable inflationary environment. Moving forward, the BSP will continue to implement prudent monetary policy and sound regulatory standards to safeguard its price and financial stability objectives and to help ensure the continued resilience of the Philippine economy,” Tetangco said.
Finance Secretary Cesar Purisima, meanwhile, said Moody’s decision to further raise the country’s credit rating “is an acknowledgment of the sound management of the economy.”
“There should be no turning back as far as good governance is concerned; the only direction we should see for the Philippine economy is forward,” he said. - With Reuters