Debt-watcher Moody’s Investors Service is upbeat about the Philippines’ recovery prospects from the pandemic, expecting the economy to outperform most of the sovereigns it rates in terms of average growth up to 2025.
In its latest credit analysis report on the Philippines, Moody’s cited its 10-year average growth projection for the Philippines between 2016 and 2025 at 4.8 percent despite the sharp contraction last year resulting from the pandemic.
“Although this 10-year average includes the steep recession in 2020 associated with the global coronavirus pandemic, we expect the Philippines to grow faster than nearly 85 percent of rated sovereigns,” Moody’s said in a recent report.
The debt watcher believes the recession last year does not represent a material weakening of the Philippines’ growth prospects.
For 2021 and 2022, the rating agency placed its growth forecasts for the country at 5.8 percent and 6.5 percent, respectively.
It also expects the Philippines to restore full-year gross domestic product growth to 2019 levels in 2022, ahead of rating peers like Panama, Uruguay, and Mauritius which are expected to revert to pre-pandemic growth levels only in 2023 or beyond.
Higher government spending, such as on infrastructure, will be among the growth drivers for the Philippines this year and next, it said. To accelerate economic recovery, Moody’s highlighted the importance of restoring business confidence to revive private domestic investments.
The country also benefits from a growing working-age population, which significantly contributes to potential economic growth, Moody’s said.
The Philippines' median age is around 25 years old, compared with more than 30 years old in Malaysia and Vietnam, and nearly 40 years old in Thailand.
Moody’s last formally affirmed the Philippines’ "Baa2” rating and the stable outlook in July 2020.
Following the review meetings conducted in June this year by its analysts with resource persons from the government and the private sector, Moody’s regarded the Philippines’ Baa2 rating and the stable outlook as well placed.
“The Philippines Baa2 rating and stable outlook remain intact,” Christian de Guzman, Moody’s senior vice-president said. “We have already incorporated in our assessment many of the developments that transpired over the past year including the negative impact of the pandemic shock.”
Baa2 is one notch above the minimum investment grade. The “stable” outlook indicates that the upside and downside risks are balanced and that the rating is unlikely to change within the short term.