Moody’s Investors Service says ratings on PHL reflects the country’s resiliency

By Joann Santiago

MANILA, Oct. 12 (PNA) — Moody’s Investors Services remains optimistic on the Philippine economy’s growth for 2015 due to its proven resiliency against external shocks.

In its latest credit analysis on the country, the debt rater said its Baa2 rating, with ‘Stable’ outlook, on the country “reflects the economy’s resilience to the current headwinds buffeting neighboring countries and emerging markets as a whole.”

”Stable domestic demand has cushioned the effects of weaker exports amid slowing growth in much of the Asia Pacific region,” it said.

The credit rater also considers as “manageable” the risks to external liquidity vis-à-vis the looming US interest rate normalization.

“Ample onshore liquidity coupled with well-entrenched inflation expectations will sustain the low interest rate environment against the backdrop of the imminent normalization of monetary policy by the US Federal Reserve,” it said.

Moody’s said its methodological assessment on the country’s strength improved to High from High (-) “due to rise in per capita income that has been sustained on account of robust economic growth.”

It disclosed that the country’s aggregate output, at USD 285 billion in 2014, is larger than 70 percent of Moody’s-rated countries and is just above the median among investment-grade countries. It, however, noted that GDP per capita remains low.

Fiscal management continue to improve for the long-run given the reforms put in place by the second Aquino administration, it said.

Inflation also remains low and inflation expectations remain well-anchored due in part to low fuel prices and effective monetary and financial stability performance of the Bangko Sentral ng Pilipinas.

Amid these factors, the debt watcher lowered its growth projection for the country this year to 5.7 percent from six percent previously after the slowdown in the first quarter of the year due to lower net exports, on account of weakness in major economies, and below-target government spending.

Growth in the first three months of the year decelerated to five percent from quarter-ago’s 6.1 percent while first half output, as measured by gross domestic product (GDP), stood at 5.3 percent from year-ago’s 6.2 percent.

The government’s growth target for the year is a range between seven to eight percent and economic officials are open to the fact that the target cannot be hit because of current challenges both here and overseas.

Thus, it has vowed to fast-track government spending, especially on infrastructure as it targets this to hit five percent of GDP by 2016.

Last March, President Benigno Aquino III signed Administrative Order (AO) 46 to streamline the procurement process and to establish special offices within the departments to monitor disbursement and project implementation.

The following quarter, government spending posted an uptick with the end-June level up nine percent year-on-year.

“The effectiveness of infrastructure development will determine the long-term prospects for economic diversification and ultimately growth,” it said.

Moody’s said “fiscal underspending weighed on overall growth earlier in the year, but should provide greater support to the economy in coming quarters.”

Household consumption also continues to be among the major drivers of growth boosted by remittances from overseas Filipinos as well as the business process outsourcing (BPO) sector.

Relatively, the debt rater said political noise in line with the 2016 national polls has increased “but we do not expect a reversal in the trend improvement in institutional strength.”

“Reform momentum has been largely sustained, leading to improved assessments of competitiveness and governance,” it added. (PNA)