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PH Receives another Investment Rating Upgrade

by: Sarah Joson

Tuesday, October 8, 2013 | Outsourcing News |

The Philippines is on a streak in obtaining investment grade rating this year as it was awarded its third from Moody’s Investors Service, a renowned credit rating agency, giving the country a Baa3 rating from the initial rating of Ba1. The first two agencies that gave the Philippines credit rating upgrades were Fitch Ratings in March, followed by Standard and Poor’s last May.

Malacañang was overjoyed when the news came out and Secretary Ricky Carandang of the Presidential Communications Development and Strategic Planning Office said the agency’s "positive outlook" remark is a surprise for them because this could mean another upgrade if all goes well in the future.

Moreover, Carandang said the upgrade is proof that the international community is confident with the Aquino administration's financial management abilities.

Moody’s identified these key drivers: political stability, improved governance, and fiscal and debt consolidation. The agency also noted the smooth movement of the country’s economic structure and performance to higher growth with low inflation.

In line with that, the economy expanded further from last year’s strong 6.8 percent growth, to 7.6 percent for this year’s first half. Moody’s noted that with those figures, the Philippines posted one of the fastest growth rates in the Asia-Pacific region throughout emerging markets worldwide.

However, Moody’s pointed out that compared to other investment-grade countries, revenue generation is still smaller, but the country is able to make way for infrastructure improvements and social spending.

Although the government shutdown in the US is anticipated to rock economies globally, Moody’s was said to have taken note of the Philippines’ resilience to external financial challenges – citing its impartiality to foreign loans as a rating factor.

The improved domestic spending activity of the Philippines is also identified as an indication that it possesses a healthy external payments position. Also, it shows liquidity in its banking system, which is likewise identified by Moody’s as the only system to have positive outlook globally.

It is also anticipated that the country will post account surplus because of the influx of remittances from overseas Filipino workers and the robust business process outsourcing (BPO) industry.

With the strong performance of the Philippine economy, Moody’s said it is unlikely for the investment rating to go down any time soon, but the macroeconomic instability of the country such as an erosion of the country’s payments position, rise in debt-servicing costs and deterioration in fiscal/debt metrics can be detrimental in the future.

Meanwhile, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the upgrade is a strong indication of the country’s solid prospects and that the latest rating upgrade could help in attracting more investors, which in turn will possibly fuel the growth of the economy.


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