The Philippine economy is expected to weather the current storm in the global financial system caused by the tapering of the US Federal Reserve’s bond-buying program.
Global debt watcher Moody’s Investor Service said the healthy economic growth and the government’s declining budget deficit and debt burden would protect the country from the repatriation of foreign capital to developed nations.
The rating firm also noted the government’s ability to tap the local market, which is flush with liquidity, to fund its borrowing requirements, relieving the pressure of having to turn to foreign investors.
“Credit support for the Philippines comes from the country’s strong growth prospects, its track record of narrow fiscal deficits, and a declining debt burden,” Moody’s said in a statement.
“Notably, the sovereign’s financing needs have been increasingly met using domestic sources. This source of funding, along with the structural current account surplus, renders financing conditions for the government less susceptible to external financial shocks.”
Earlier this week, government officials said economic growth in 2013 likely fell within its target range of 6 to 7 percent target range-—a view shared by the World Bank—despite the devastation caused by Supertyphoon “Yolanda.”
Likewise, the country’s money supply also grew by a record high of 36.5 percent last November, helping support rising demand for bank loans due to the country’s expanding economy.
Moody’s said its outlook for Southeast Asia as a whole was stable, reflecting the rating agency’s expectation that global growth prospects would improve while global risks would decline.
However, Moody’s pointed out that the region could face heightened credit pressures in 2014, owing in part to the Fed’s decision to cut back its expansive quantitative easing policy.
“In Indonesia, the widening of the current account deficit over the past two years has given way to concerns about the sustainability of the country’s external payments position. While the policy response has shifted toward stabilization, political risks could rise, ahead of elections later this year,” said Tom Byrne, senior vice president and manager for Moody’s Sovereign Risk Group.