The Philippines maintained its investment grade credit ratings from Moody’s Investors Service despite the grievous challenges pose by the coronavirus pandemic to the nation’s economic and fiscal strengths.
Moody’s, one of the three major international credit rating agencies, said yesterday that it affirmed the government’s long-term local currency and foreign currency issuer and senior unsecured debt ratings at “Baa2,” which is one notch above minimum investment grade.
Moody’s also maintained its sovereign outlook at “stable.”
“The rating affirmation and stable outlook reflect Moody's view that the fortification of the government's fiscal position in recent years provides a buffer against a rise in public indebtedness due to shocks such as the ongoing global coronavirus outbreak,” Moody’s said.
“Relatedly, the track record of prudent economic and fiscal management, and a robust banking system, contribute to stable access to funding at moderate costs and support prospects for fiscal consolidation and debt stabilization after the shock subsides,” it added.
Moody’s also said the Philippines' sustained improving fiscal metrics—with national government debt falling to 39.6 percent of gross domestic product (GDP) in 2019 from 50.2 percent in 2010—helped in maintaining its investment grade credit ratings.
But the debt-watcher said the country would suffer an “acute shock” this year owing to the coronavirus disease (COVID-19) pandemic, but the government’s fiscal strength will remain consistent with similarly-rated peers.
The country’s economy is expected to contract by 4.5 percent this year, but seen to recover next year at a growth rate of 6.5 percent, Moody’s said.
“The stable outlook reflects the view that the recovery from the acute shock posed by the coronavirus outbreak will restore rapid economic growth relative to peers, complemented by the stabilization and eventual reversal of the deterioration in fiscal and debt metrics,” agency said.
Moody’s also said that the nation’s external vulnerability risks are muted despite pressures on exports of goods and services as well as an expected fall in remittances from overseas Filipinos.
The rating agency, meanwhile, said that reforms being initiated by the Duterte administration are likely to take a pause following the adverse impact of the pandemic and the forthcoming presidential elections.
“Moody's expects that more structural economic and fiscal reforms will be on hold for some time, delaying potential further improvements in the Philippines' credit profile,” it said.