MANILA, June 28 — Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said Moody’s Investors Service’s move to affirm its credit rating on the Philippines only shows the continued improvement in the domestic economy.
“The decision of Moody’s speaks well regarding the favorable path that the Philippine economy continues to tread, partly on account of the price and financial stability that comes on the back of prudent monetary policies and bank supervision,” he said in a statement released by the Investors Relations Office (IRO) Wednesday.
“The banking sector, which remains strong and stable, will also continue to support the increasing potential output of the economy as it provides financing for growing investment and consumer demand,” he added.
The statement was released a day after Moody’s affirmed its Baa2 rating, with stable outlook, on the country.
The rating is a notch higher than first investment grade rating, which the debt rater gave the country in December 2014.
Moody’s first upgraded the Philippines into an investment grade economy in October 2013 after citing the stability of the country’s funding conditions.
Moody’s, in a statement, said the affirmation of its ratings on the country was due to its expectations “that the Philippines’ economic performance will remain strong while debt consolidation will continue and foster further convergence of key fiscal metrics versus corresponding peer medians.”
It sees sustained domestic expansion of above six percent in the near term, after noting the 6.4 percent annual average growth of the economy from 2014-16.
In the first quarter of 2017, the domestic economy grew, as measured by gross domestic product (GDP), by 6.4 percent.
The debt rater also noted the improving debt management ability of the government after the improvement of unconsolidated general government debt to 38.3 percent of GDP in 2016 from 47.8 percent in 2009.
”We project the Philippines’ indebtedness to remain low over the medium-term compared to similarly-rated sovereigns, with general government debt falling to around 37 percent of GDP by 2017,” it said.
With these observations and the affirmation of ratings, Finance Secretary Carlos Dominguez III said the current rating of the debt rater on the country “is a telling mark of the Duterte administration’s heightened efforts to sustain the robust growth of the Philippines by attracting more investments and, more importantly, to make it a more inclusive one by raising spending on infrastructure and human capital.”
The Department of Finance (DOF) chief said the government was really committed to further sustain economic reforms, through the proposed tax reforms, among others.
In response to Moody’s worries about the ongoing conflict in Marawi City in southern Philippine, Dominguez said the government was on top of the situation.
He explained that “imposition of Martial Law in Mindanao, which is allowed under the Philippines’ Constitution and which has won support from the people, the business community, and the Congress, shows that the government is doing what is required to address this situation within the bounds of the law.”
“This decisive action was taken to insulate the vibrant domestic economy from the conflict,” he said.
“This administration continues to take actions to sustain the growth momentum and enhance investor confidence in the economy, and the ongoing efforts toward strengthening national security are testament to this commitment,” he said.
Dominguez also said that the business process outsourcing (BPO) sector, growth of which is seen to be negatively impacted by the protectionist policies in the US, was seen to remain among the growth drivers of the economy.
“At the end of the day investors make decisions based on what are good for business. And the Philippines, with its competitive cost, and young and educated workforce, will continue to be a wise investment destination for BPO companies and other enterprises,” he added. (JSV/PNA)