The Philippines received a Baa2 rating from Moody’s Investors Services, indicating a medium risk in the country’s ongoing economic recovery.
Moody’s Investors Service affirmed the Philippines’ investment-grade credit rating of “Baa2” with a “stable” outlook emphasizing the country’s steady recovery, sound fundamentals, and economic policy continuity.
Moody’s is a bond credit rating business that provides international financial research on bonds issued by commercial and government entities.
An investment grade rating indicates a lower credit risk which allows a country to receive funds from development partners and internal capital markets at a lower public cost. This allows a country to redirect funds that would otherwise go toward interest payments to socially beneficial programs and projects.
Baa2 is the ninth highest rating in Moody’s where obligations rated by Baa2 are subject to moderate credit risk. They are considered medium grade and may have some speculative traits.
“The rating action is driven by its views that the challenging global credit conditions will not derail the Philippines’ ongoing recovery from the pandemic," said Moody’s.
It noted that one of the key reasons for the rating is the country's fundamental strengths in its banking system and its ability to satisfy external debt obligations, despite cyclical constraints on the balance of payments and consequent exchange rate depreciation.
However, Moody’s said that the COVID-19 outbreak had caused an "erosion" in its assessment of the Philippine economy's strength.
The Philippines’ economy grew by 7.4 percent in the second quarter, which is slower than the 8.2 percent in the first three months of the year and 12.1 percent in the same quarter of 2021, GMA News reported.
BSP and DoF Response
The Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla said that
“this affirmation will support the sustained recovery of the domestic economy.”
Medalla welcomed Moody’s acknowledgment of the country’s well-capitalized banking system, which continues to meet the financial needs of businesses and households.
“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,” Medalla added.
Meanwhile, Finance Secretary Benjamin E. Diokno emphasized that Moody’s affirmation of the Philippines’ Baa2 rating comes amid a wave of credit rating downgrades of economies rendered vulnerable by the pandemic.
“Sustained implementation of reforms will further strengthen the country’s fiscal position” Diokno added.
Additionally, the finance chief and head of the economic team also emphasized the government's commitment to following the Medium-Term Fiscal Framework and the socioeconomic agenda of the Marcos administration's legislative priorities.
Tags: #Economy, #Moody’s, #MediumRisk, #Philippines, #Pandemic