Finance Secretary Benjamin Diokno welcomed Moody’s Investors Service’s rating decision on Thursday (September 15), which reaffirmed the Philippines’ Baa2 with a “stable” outlook, citing the resilience of the country’s economic recovery to external pressures and the government’s commitment to policy continuity.
“We welcome Moody’s reaffirmation of its favorable rating and outlook for the Philippines. The Marcos administration will continue to exercise fiscal prudence to ensure sufficient funding for our programs while meeting our financial obligations,” said Secretary Diokno.
Moody’s rating action was driven by the view that the challenging global credit conditions will not derail the country’s continued recovery from the COVID-19 pandemic.
In Moody’s view, the rebound in the country’s economic activity since mid-2021 has been strong and will be resilient to the current challenges posed by the turn in global credit conditions over the near-term.
The Philippine economy is likewise not significantly exposed to Russia. The country is less dependent on external demand as compared to Asia-Pacific peers given its relatively large domestic market, which in turn is further supported by stable remittance inflows from overseas Filipinos.
Moody’s also said that the government’s commitment to policy reforms helps assure gradual fiscal repair, following a reversal of the strengthening of the government’s fiscal and debt metrics resulting from the pandemic.
Moody’s cited the Marcos administration’s introduction of a Medium-Term Fiscal Framework as an assurance of gradual fiscal consolidation and debt stabilization.
The Framework, which aims to reduce the fiscal deficit, promote fiscal sustainability, and enable robust economic growth, emphasizes broadening revenue generation and maintaining high infrastructure spending.
The Philippines likewise retains fundamental strengths in terms of the stability of the banking system and the capacity to meet external debt repayments, despite cyclical pressures on the balance of payments and consequent exchange rate depreciation.
Moody’s also reaffirmed the government’s foreign currency senior unsecured shelf rating at (P)Baa2 and the senior unsecured ratings for the liabilities of the Bangko Sentral ng Pilipinas (BSP) at Baa2.
According to Moody’s, the credit quality of the BSP is closely aligned with that of the government.