PH wins investment grade from Moody’s

Rappler.com
Moody's cites the Philippines' robust economic growth, fiscal consolidation, and improved governance for the rating upgrade

 

MANILA, Philippines (UPDATE) – The Philippines on Thursday, October 3 completed its transformation into investment grade status after it won a credit rating upgrade from Moody’s.

The decision to give Manila a “Baa3” rating with positive outlook follows similar moves by the two other international debt watchers Standard & Poor’s and Fitch early this year.

Moody’s made its decision, citing the country’s strong growth, political stability and improved governance.

“The Philippines’ economic performance has entered a structural shift to higher growth, accompanied by low inflation,” it said.

The Philippines’ economic growths in 2012 and the first half of 2013 were among the highest in Asia-Pacific even as inflation remained “well-anchored” and below the central bank’s ceilings, Moody’s said.

“The new growth path is being reinforced in part by improved fiscal management,” allowing more money to be spent on infrastructure and social services, it added.

A Baa3 rating is the lowest in the outfit’s investment ranks but represents an important milestone for the country, which was once considered the “sick man of Asia.”

The Philippine economy expanded 6.8% in 2012 and 7.6% in the first half of 2013, among the highest in Asia-Pacific.

Governance reforms

President Benigno Aquino III’s spokesman Ramon Carandang said the upgrade was “proof that the continuing fiscal reforms … are further improving our credibility in the international community.”

Bangko Sentral ng Pilipinas governor Amando Tetangco said the upgrade is a recognition of the country’s prudent macroeconomic policies and good governance.

“This is an affirmation of the steady and responsible macroeconomic stewardship and purposeful structural reform agenda of the Philippines.”

Moody’s said the Aquino administration’s popularity among voters “supports further institutionalization of reforms for good governance.”

“This situation has in turn been reflected in improving third-party assessments of institutional quality and international competitiveness,” it noted.

Investments, borrowing costs

Tetangco said the latest credit rating upgrade is crucial in attracting more investments into the country.

“This development should bode well for more investments, both local and foreign in the country. Greater investments should strengthen the base for sustained and inclusive economic growth and usher in a transformative period for the Philippine economy,” he explained. 

An investment grade is a seal of good housekeeping. It tells investors it is safe to do business in the country, and encourages them to put huge capital here.

An investment grade means the Philippines, as a borrower, has a strong ability to pay its debts. This lowers its borrowing costs, generating savings that are used for social services.

The Philippines won its first investment grade rating from Fitch on March 27 and its second from Standard & Poor’s on May 2. The Japan Credit Rating Agency Ltd. also gave the country an upgrade on May 7.

View Rappler’s infographic: What a credit rating upgrade means for Filipinos

– Rappler.com, with a report from Agence France-Presse