Moody’s affirms investment grade

Stable outlook reflects the view that the recovery from the acute shock posed by the coronavirus pandemic will restore rapid economic growth relative to peers

International credit watcher Moody’s Investors Service recognized the country’s economic stability despite the pandemic.

Affirming its Baa2 stable outlook, Moody’s said that the Philippines’ credit profile is characterized by a strengthening fiscal position and limited vulnerability to external shocks.

“The stable outlook reflects the view that the recovery from the acute shock posed by the coronavirus pandemic will restore rapid economic growth relative to peers, complemented by the stabilization and eventual reversal of the deterioration in fiscal and debt metrics,” it explained.

Risk evened out

“This scenario is balanced against the risk that the economy’s potential is hit more significantly than we currently estimate and/or that fiscal and economic reform momentum does not resume, leaving the Philippines’ economic and fiscal strength somewhat weaker,” it added.

According to the credit watchdog, factors that could lead to a credit upgrade include the fast reversal of the fiscal and debt deterioration brought by the pandemic.

“This would likely entail a sustained restoration of economic growth to rates similar to those recorded prior to the outbreak. Together, a resumption of sustained high growth and rapid restoration of fiscal strength would denote particularly effective macroeconomic and fiscal policy,” it said.

Occurrence of the opposite would meanwhile, lead to a downgrade on the sovereign’s credit score.

Factiors to avoid

“The reversal of reforms that have supported prior gains in economic and fiscal strength would also likely lead to a downgrade. A material deterioration of institutions and governance strength, with signs of erosion in the quality of legislative and executive institutions, would also be negative,” Moody’s said.

Scenario is balanced against the risk that the economy’s potential is hit more significantly than we currently estimate.

Acting Socioeconomic Planning Secretary Karl Kendrick Chua earlier said that the country’s goal to achieve an upper middle income class status remains achievable and could manifest in 2022.