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Lower Credit Rating Unlikely for the Philippines

by: Sarah Joson

Monday, November 17, 2014 |

Renowned credit rating organization Moody’s Investor Service believes that the Philippines will maintain its positive outlook sovereign rating due to its resilient economy, large foreign exchange liquidity, sound political environment, and easing debt. The financial institution also noted that a downward rating is unlikely in the near future.

Last year, Moody’s raised the credit score of the Philippines to investment grade status with a rating of "Baa3" with a positive outlook, which could also mean that the government is anticipated to improve in the next 12-18 months.

The organization also cited several factors that affected the credit profile of the country. First, the country is unfazed by the damages brought on by Typhoon Yolanda, and then there’s the buoyant economy. The Philippines was also given a "structural shift to higher growth" citation, alongside low inflation.

The country is said to be "above average" in terms of economic growth rates - even outdoing its counterparts in Asia-Pacific and emerging markets globally. The gross domestic product (GDP) increased from 6.8 percent in 2012 to 7.2 percent in 2013. Meanwhile, growth settled at six percent during the first half of this year.

The Bangko Sentral ng Pilipinas (BSP) said even with the above average growth of the local economy, inflation has remained within the target range. Inflation is expected to ease up in the last few months of 2014 amidst hitting three-year highs in this year’s second half.

Moody noted that the Philippines’ improving fiscal position and the rising revenues due to higher public spending on infrastructure and social services are complementing its "new growth path".

The Philippines’ revenue performance is still behind those more developed nations that have investment grade ratings, but the country’s budget deficits are becoming narrower than its peers since 2008. The country’s debt is expected to decline in the near future.


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