In a statement on Tuesday, Moody’s cited the Philippine government’s declining debt burden, improving revenue collection, and comfortable level of foreign-currency liquidity in its decision.
The “positive” outlook is assigned to the country’s existing Ba2 rating, which is two notches below investment grade. Said outlook normally is followed by an actual upgrade in the credit rating should existing macroeconomic trends are sustained.
“The government of the Philippines has continued to demonstrate prudence in its fiscal management, as characterized by low budget deficits relative to its rating peers and a steadily declining level of debt relative to GDP (gross domestic product),” Moody’s said.
“Such outcomes are the result of expenditure restraint and improved revenue performance,” it added.
Moody’s said favorable macro-economic indicators would help increase investments, which would accelerate the overall growth of the economy.
From over 80 percent of GDP in the early 2000s, the government’s debt now is equivalent to just about 55 of GDP.
Last year, the government posted a budget deficit of nearly P198 billion. This was equivalent to 2 percent of the country’s GDP, better than the 3.2-percent targeted ceiling.
Moreover, the country’s gross international reserves reached $76.5 billion as of end-March, which was equivalent to over 11 months’ worth of the country’s imports.
“This positive rating action is welcome and is a sign that Moody’s is seeing the fruits of good governance on all fronts— fiscal, monetary, and external (liquidity),” Governor Amando Tetangco Jr. of the Bangko Sentral ng Pilipinas said.
Tetangco is one of the government officials pitching for an investment grade for the Philippines. Economic officials are saying the country’s macro-economic fundamentals are comparable to those that already enjoy investment grade.
They said an investment grade for the Philippines has long been overdue, citing how the international capital market has been pricing the country’s bonds. They said Philippine sovereign bonds have been fetching yields that have been as low as the yields carried by bonds issued by countries with investment grade.
Moody’s and other credit-rating agencies, however, said further improvements in the Philippine government’s fiscal standing and the country’s economic performance should be realized for it to deserve an investment grade.
Standard & Poor’s assigns the Philippines a credit rating that is two notches below investment grade and a “positive” outlook.
Fitch assigns a rating that is just a notch below investment grade and a “stable” outlook, which indicates the likelihood that the rating will remain the same at least within the short term.