The Philippines has once again been recognized as one of Asia-Pacific’s expected outperformers, amid weak demand from the United States and Europe that has dragged down the export-driven economies of other countries in the region.
In a new report, rating firm Moody’s Investor Service said the Asia-Pacific region remained stable, despite global headwinds caused by slowing growth in China and a tepid recovery in the US.
“Global market volatility over the past few weeks has adversely impacted asset markets across Asia Pacific in a swift and undifferentiated manner,” Moody’s said.
Moody’s warned that while foreign investments may return to the region following the recent pullout, “capital inflows will likely return with an eye towards risk-adjusted returns in contrast to the indiscriminate search for yield that characterized inflows in recent years.”
Unlike the rest of the region, however, a few countries, including the Philippines, are expected to be more attractive investment destinations given their proven resilience in the face of difficulties abroad.
“Indonesia and the Philippines have featured the biggest improvements in terms of their percentile ranking,” the rating firm’s Sovereign Mid-Year Update said.
“High economic growth, narrow fiscal deficits, and exchange rate appreciation have combined to lead to debt consolidation in both countries and have contributed to the upward trajectory in their ratings,” Moody’s said.
The report noted that the Philippines was one of the few countries that were able to reduce levels of government debt despite the global slowdown that started in 2009. This came as other countries accumulated debt to fund stimulus efforts during the crisis.
Moody’s said between 2007 and 2013, the Philippines’ level of government debt fell by 4.9 percent in relation to its proportion to gross domestic product (GDP). This was lower than the 10.8-percent decline in Indonesia, but higher than the 4.8 percent posted by India.
Amid the Philippines improved performance, Moody’s once again hinted at a possible upgrade of the country’s sovereign credit rating.
Rating firms Standard & Poor’s and Fitch Ratings already rate the Philippines at investment grade, while Moody’s still rates the country one notch lower.
A country’s sovereign rating is a reflection of the condition of its economy since it indicates the national government’s ability to repay its obligations.
“The positive outlook for the Philippines is unique globally, while those for Hong Kong, Mongolia, and Singapore have been revised to negative this year,” the Moody’s report read.