Philippines has ‘rare kind of economic resilience’ – Moody’s

MANILA, Philippines - Debt watcher Moody’s Investors Service says the Philippine economy remains resilient to the current headwinds buffeting neighboring countries and emerging markets as a whole.

The credit rating agency cited the country’s rare kind of economic resilience against a challenging global environment and pointed out the Philippines is well ahead of other emerging markets in terms of managing external adversities.

Moody’s cited the country’s strong domestic consumption, healthy external payments position, stable banking sector, rising contribution of private-sector investments to growth, increasing per-capita income, benign inflation, and declining debt burden.

 “The Philippines’ Baa2 government bond rating reflects the economy’s resilience to the current headwinds buffeting neighboring countries and emerging markets as a whole,” Moody’s said in its latest report on the Philippines.

It expects the Philippines, compared with other emerging markets, to remain less affected by external shocks, such as market volatility arising from the pending tightening of US monetary policy, weak global demand, and slowdown of China and other major economies.

“The Philippines’ susceptibility to event risk is low, reflecting a robust external payments position, strong local demand that insulates funding conditions for the government from external financial shocks, and a banking system that poses limited contingent risks to the government,” it said.

The highly favorable credit opinion by Moody’s signals the Philippines’ investment-grade sovereign credit rating is well secured.

The country is keen on keeping its credit rating within the investment- grade category given its benefits to the general economy and to ordinary citizens.

A credit rating within the “investment-grade” territory (in contrast with ratings within the speculative category) signals adequate ability and willingness of a government to pay liabilities as they fall due.

Such a rating helps reduce interest rates on borrowings not only of the government but also of private enterprises and individuals. An investment-grade sovereign credit rating may help attract job-generating investments.

In zeroing in on the country’s banking sector, Moody’s noted its ability to cushion external headwinds.

“The banking system is virtually immune to contagion from external shocks. It is largely deposit funded – aided in part by steady flow of remittances-and exhibits a lack of dependence on external funding and low exposure to the export sector,” Moody’s said.

Moreover, Moody’s also highlighted the growing confidence of the private sector, which is reflected in rising investments and which help boost incomes of Filipinos.

On the fiscal front, Moody’s said the country’s fiscal strength continued to improve due to the consistent decline of the debt burden, which means improving manageability of the government’s liabilities.