Moody’s defends PH's 'underrated' credit score


Posted at Dec 24 2014 10:30 AM | Updated as of Dec 24 2014 10:45 PM

MANILA – Global credit rating firm Moody's Investors Service said constraints in infrastructure and weak revenues are key issues that hinder the Philippines from securing a higher credit rating.

Moody’s also cited the country’s low gross domestic product (GDP) per capita income for its lower investment grade status compared to its peers.

“The government's revenue as measured against GDP and the country's GDP per capita is low when compared to investment grade peers. Policymakers may also face the challenge of sustaining the positive trajectory of institutional quality through the political cycle,” Moody’s said.

Finance Secretary Cesar Purisima earlier said the Philippines is being underrated by three major international credit rating agencies including Moody’s, despite receiving positive grade status from the debt watcher.

Last year, the Philippines secured investment grade sovereign credit ratings from Moody’s, Fitch Ratings, and Standard and Poor’s for the first time in its credit history.

Moody's and Standard and Poor’s then upgraded the Philippines’ credit status to “Baa2” and “BBB,” respectively.

Finance Undersecretary Gil Beltran, however, believes that the Philippines’ credit ratings should be the same as that of neighboring countries Malaysia, Indonesia and Thailand.

“Our premium is almost the same as that of Malaysia, which higher rated than us. If you look at what the market is saying we should have a higher rating than Thailand and Indonesia,” Beltran said.

But Beltran acknowledges that the country’s low per capita income is keeping it from receiving a better credit rating status.

The Philippines per capital income in 2013 was $2,787, way below Malaysia’s $9,938 and Thailand’s $6,136. Indonesia had a per capital income of $3,282.

Moody’s said the recent upgrade of the Philippines' credit rating was driven by the ongoing reduction of government debt, strong growth, and limited vulnerabilities to external risks affecting emerging markets.

Moody's also noted that the private sector has maintained a relatively rapid pace of growth, adding that the resilience of private investment shows the sustainability of higher growth over the next two years.

“Nonetheless, the government's ambitious growth target may be difficult to achieve in the absence of more effective budget execution,” Moody’s said.

“The stable outlook reflects Moody's expectation over the next one to two years that positive economic and fiscal trends will be sustained. However, these will be balanced against weaknesses in the sovereign's credit profile,” it added.