The Philippines on Thursday obtained its third investment grade rating for the year—this time from Moody’s Investor Service—securing its place as Asia’s fastest growing economy.
“It’s about time,” National Treasurer Rosalia de Leon said in a text message, reacting to the news.
Moody’s is the last major credit rating firm to upgrade the Philippines to investment grade. Fitch Ratings was the first to recognize the Philippines’ improved economic standing in March, followed by Standard & Poor’s in May.
Tokyo-based Japan Credit Rating Agency (JCR) also upgraded the Philippines to investment grade last May.
The Philippines is now rated “Baa3” by Moody’s—a notch higher than the previous “Ba1,” which was considered “speculative.”
Finance Secretary Cesar Purisima echoed the National Treasurer’s statement when he described the upgrade as long overdue. He said the upgrade was due to sound economic policies and the public sector’s push toward good governance.
“Good governance is truly good economics,” Purisima said in a statement he posted in his facebook account.
Purisima said that despite the investment rating from Moody’s, the Philippines actually remains one of the most underrated countries in the world.
He cited the interest rates on Philippine bonds, which are about the same as interest rates on bond from countries with higher credit ratings.
The higher credit rating should give the government more access to cheaper credit because investors may now consider the country’s debt to be less risky.
“The upgrade by Moody’s completes the investment grades we aspired for. We can expect improvements in terms of foreign investments and tourism,” Budget Secretary Florencio Abad said in a press conference yesterday.
Lower borrowing costs for the government may mean more resources for it to spend on basic services for the people.
Yields on government debt paper are also used by local banks to price their loans to the public. This means that households can expect lower interest rates for housing and car loans, among others.
Businesses will also have access to cheaper credit, allowing them to expand their businesses more easily, leading to the creation of more jobs.
Abad said that, because of the investment rating upgrade, interest payments should be lower than what was originally programmed for 2014.
“We expect the ability of our country to borrow from abroad to improve even further as the country’s risk profile also has improved,” Abad said.
In a statement, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said Moody’s upgrade should spur investments, which would lead to the creation of more jobs.
“Greater investments should strengthen the base for sustained and inclusive economic growth and usher in a transformative period for the Philippine economy,” Tetangco said.
In a statement Thursday, Moody’s also revised its outlook for the Philippines’ government debt rating to positive, indicating the possibility of another upgrade in the next 12 to 18 months.
“The Philippines’ economic performance has entered a structural shift to higher growth, accompanied by low inflation,” it said.
Moody’s cited the country’s gross domestic product growth in 2012, which clocked in at 6.8 percent. The country’s growth accelerated to 7.6 percent in the first half of the year, outpacing the rest of the Asia-Pacific region.
Moody’s assessment on the Philippines’ growth prospects for the year mirrors the forecast of other international analysts on the country, now seen as one of the few bright spots amid bleak global economic conditions.
The International Monetary Fund expects the economy to grow by 6.75 percent this year. Also, Asian Development Bank sees the economy growing by 7 percent this year, faster than any other country in Southeast Asia.
Yesterday, Fitch announced that it too had revised its growth outlook for the Philippines this year to 6.2 percent from the previous 5.5 percent.
“These levels are among the fastest rates of growth in Asia-Pacific and across emerging markets globally. At the same time, inflation remains well-anchored and is currently below the central bank’s target range,” it said.
The BSP expects consumer prices to rise within its target range of 3 to 5 percent for 2013 and 2014, and 2 to 4 percent for 2015.