By Prinz P. Magtulis
MANILA, Philippines – Debt watcher Moody’s Investors Service has upgraded the Philippines’ credit rating to one notch below investment grade Monday, citing good economic prospects and fiscal gains.
The country’s foreign and local currency ratings were improved to Ba1 from Ba2 assigned last June 2011. It also assigned a stable outlook.
The Aquino administration is batting for an investment grade by next year in a bid to further lower borrowing costs and attract more foreign investments.
In a statement, Moody’s cited Philippines’ “enhanced” growth prospects and improving fiscal position.
“Despite the headwinds from softening external demand, the Philippines has demonstrated considerable economic strength and fiscal resilience,” the credit rater said.
“In contrast to similarly rated countries, the country is poised to record a combination of faster growth, lower inflation, exchange rate appreciation, and an increase in foreign exchange reserves, while maintaining trend debt consolidation,” it added.
Economic growth hit 5.9 percent in the first semester, within the official five- to six-percent goal for the year. The government’s budget position has likewise been contained with fiscal deficit at P106.062 billion as of the third quarter, way below the P183.343-billion cap for the period.
Moody’s said further upgrade would depend on “the passage and effective implementation of revenue reforms” such as the “sin” tax and fiscal incentives rationalization bills, fast reduction of government debt and higher growth.
“A negative rating action could be prompted by the emergence of macroeconomic instability that leads to a substantial deterioration in fiscal and government debt metrics, an increase in debt servicing costs, and/or an erosion of the country’s external payments position,” the debt watcher said.
The upgrade placed Moody’s ratings in line with that of Standard & Poor’s Ratings and Fitch Ratings, which upgraded the Philippines earlier to one notch below investment grade.