Moody’s: PHL economy strong amid headwinds
INTERNATIONAL credit watcher Moody’s Investors Service announced that it has assigned a “high” economic strength to the credit profile of the Philippines, owing largely to its robust growth amid global headwinds.
Moody’s made the announcement after the credit watcher completed its periodic review of Philippine economic dynamics.
Christian de Guzman, Moody’s vice president and senior credit officer, said the ability of the Philippines to post a relatively strong growth balances out the fact that the country still has a low GDP per capita compared to similarly rated peers.
For other metrics, Moody’s gave a “moderate” rating to the country’s institutional strength, taking into account a “long track record of maintaining broad monetary and financial stability.” Moody’s also took note of the country’s recent progress in addressing long-standing weakness in revenue generation as compared to peers.
A moderate assessment was also given to the Philippines’s fiscal strength, reflecting a moderate government debt burden coupled with weaker debt affordability compared to its peers, although this has improved significantly over the past decade.
Moody’s also assigned a “low” assessment to the country’s susceptibility to event risk driven by domestic political risk and banking sector risk. Robust capitalization, liquidity and profitability mitigate event risk, the credit watcher said.
Last month, the credit watcher lauded the economic laws enacted by the government, as these will enhance the macroeconomic and financial stability of the Philippines.
On February 15, President Duterte signed a number of bills into law, including the “Act Providing for Reasonable Rates for Political Advertisements”; Republic Act (RA) 11211, or the New Central Bank Act; the
Social Security System (SSS) Rationalization Act; and Republic Act 11203, or the rice trade liberalization law.
Moody’s said two of these new laws—the rice trade liberalization law and RA 11211—are “credit positive” for the country’s economy. Moody’s currently rates the Philippines at Baa2 with a stable outlook.
“The Rice Tariffication scheme, effective March 5, eliminates quantitative restrictions on rice imports, replacing them with tariffs. We expect the expected increase in the volume of rice imports will diminish the price volatility of rice, helping to insulate Filipino households’ consumption to adverse agricultural shocks,” Moody’s said in its research note.
“The amendment to the BSP’s charter expands its supervisory oversight over nonbank financial institutions such as money service businesses, credit granting businesses and payment system operators, which will enhance financial stability given the linkages between the banking system and these entities,” it added.