Moody’s affirms PH investment grade rating
Moody’s Rating has kept the Philippines’ investment grade rating due to recent economic reforms, but flagged persistent pressures about higher debt levels, rising interest rates, and geopolitical tensions with China.
In a statement on Friday, Moody’s Rating affirmed the country’s “Baa2” credit rating with a “stable” outlook, meaning changes in the rating are unlikely in the next 18 to 24 months.
A credit rating is a measure of an entity’s capacity to settle its debts. The higher rating means better perception of lenders on a borrower’s ability to pay its obligations.
Explaining its decision, the credit rater said that the government’s recent economic reforms to attract foreign investment are expected to boost the country’s long-term growth, however, it expects the debt burden to stay higher than pre-pandemic levels which mirrors similar countries with the same credit rating.
For the second quarter, the country expanded by 6.3 percent, accelerating from the 5.8 percent growth in the previous quarter. The expansion placed well within the government’s 6 to 7 percent target for the year.
Moody’s expects strong growth in the country buoyed by steady household spending as the effects of El Niño dwindles and the reduction in rice tariffs will help lower food prices.
To add, investments and increasing exports is expected to contribute robust expansion, supported by a recovery in electronic exports, gradual increases in business process outsourcing revenues, and a rebound in international tourism.
Despite this, Moody’s highlighted the ongoing geopolitical tensions with China also pose a risk to the rating.
“The rating also considers weakening debt affordability amid higher interest rates and a weaker Philippine peso,” Moody’s said.
Moody’s said that debt affordability is expected to worsen over the next two years despite the central bank’s recent policy rate cut.
The Monetary Board last week cut its policy rate by 25 bps, reducing the key rate to 6.25 percent. This was the first rate cut in almost four years or since November 2020, during the height of the pandemic.
Meanwhile, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona, Jr. welcomed the credit rating, noting that the central bank is balancing its efforts to maintain stable prices, which is essential for ensuring steady and sustainable economic growth.
“The stable outlook reflects a balance of risks. Upward credit pressure could come from improved fiscal metrics, strong growth, and higher public and private investments, while downward risks include external challenges that could weaken consumption and investment or ineffective reforms,” the BSP said in a statement.
