Phl to sustain positive growth over next 1-2 years – Moody’s

MANILA — The Philippines is expected to sustain its positive economic and fiscal trends over the next year or two although “the relatively high proportion of government debt denominated in foreign currency” makes it “susceptible to currency risks,” Moody’

“In addition, the country's GDP per capita is among the lowest for investment-grade countries,” Moody’s added in a statement.

Moody's said “the Philippines' Baa2 government bond rating reflects the resilience of its economy to the current headwinds buffeting neighboring countries and emerging markets as a whole.”

It said its credit analysis of the country, “which constitutes an annual update to investors and is not a rating action,” showed “high” economic strength, “moderate” institutional and fiscal strength and “low” susceptibility to event risk.

“Domestic demand has cushioned the effects of weaker exports amid slowing growth in much of the Asia Pacific region” while “external risks to the government's external liquidity and funding conditions arising from the prospective tightening by the US Federal Reserve are manageable,” it said.

It also did not expect the political noise leading to next year’s elections to adversely affect improvements.

At the same time, Moody’s noted that “bottlenecks in fiscal expenditure continue to weigh on growth and could threaten the government's capacity to meet its goal of increasing infrastructure spending to at least five percent of GDP by 2016” even as it noted the Public Private Partnership Program gaining traction after a slow start when the Aquino administration took the reins of government.

Moody's also expected “government debt as a share of GDP to fall for a fifth consecutive year in 2015 as fiscal deficits remain narrower than budgeted.”

“Both the public and private sector have also relied less on cross-border sources of financing in recent years, leading to improved external debt ratios and lowering the country's susceptibility to volatile capital flows,” it added.

Nevertheless, it said, “the government's revenue — as measured against GDP — is low and debt affordability remains weak when compared to investment-grade peers, although both ratios have improved in recent years, says the rating agency.”