Moody’s stamp ‘defies trend’

The rating affirmation and stable outlook reflect Moody’s view that the fortification of the government’s fiscal position in recent years provides a buffer

International credit watcher Moody’s Investors Service affirmed the country’s stability despite economic risks including the backlash from strict lockdown measures in response to the coronavirus disease (COVID-19) pandemic.

“Moody’s Investors Service has today affirmed the government of the Philippines’ long-term local and foreign currency issuer and senior unsecured debt ratings at Baa2. The outlook has been maintained at stable,” Moody’s said.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said with Moody’s affirmation of the Philippines’ credit rating at Baa2 with a stable outlook, the Philippines continues to defy the trend.

“The rating affirmation and stable outlook reflect Moody’s view that the fortification of the government’s fiscal position in recent years provides a buffer against a rise in public indebtedness due to shocks such as the ongoing global coronavirus outbreak,” it added.

“As of end June 2020, Moody’s has downgraded the credit ratings of 18 sovereigns and revised to ‘negative’ the outlook on the ratings of 27 sovereigns,” Diokno indicated.

Vantage point

“The affirmation from Moody’s, Fitch and S&P’s and the upgrade from Japan Credit Rating Agency supports our view that the pandemic hit the Philippines from a position of strength. While the economy will contract this year, its prospects for a strong rebound next year and future years are bright,” Diokno added.

As of end June 2020, Moody’s has downgraded the credit ratings of 18 sovereigns and revised to “negative” the outlook on the ratings of 27 sovereigns.

According to the credit agency, the country’s prudent economic and fiscal management track record and robust banking system contribute to the country’s stable access to funding at moderate costs.

“This strengthening in credit metrics, anticipated and reflected in successive upgrades in the Philippines’ rating between 2009 and 2014, support Moody’s view that the sovereign will be resilient to shocks such as the coronavirus pandemic,” it explained.

Terms spelled

Factors that would prompt an upgrade in the country’s credit score according to Moody’s include the rapid reversal in the deterioration of fiscal and debt metrics from the pandemic and the restoration of economic growth.

On the other hand, factors that could cause a downgrade include the emergence of macroeconomic instability, the reversal of previous reforms that supported economic gains and signs of deterioration of institutions and governance strength.

Moody’s expects the country’s economy to contract by 4.5 percent in 2020 before bouncing back by 6.5 percent in 2021.