Strong macroeconomic fundamentals beneficial to Duterte government – Moody’s

MANILA, Philippines - Moody’s Investors Service said the administration of incoming president Rodrigo Duterte would benefit from the country’s strong macroeconomic fundamentals.

Moody’s vice president and senior credit officer Christian de Guzman said the victory of Duterte in the May 9 polls would not immediately affect the sovereign credit profile of the Philippines. “The incoming government will be formulating its economic and fiscal strategies against the backdrop of a favorable economic environment,” De Guzman said.

De Guzman said the Philippines shows sustained high economic growth while also demonstrating price stability, a robust external payments position and debt consolidation.

“We expect broad policy continuity in the country, with regards to economic and fiscal management,” he added.

The country’s gross domestic product (GDP) growth accelerated to 6.9 percent in the first quarter from the revised 6.5 percent in the fourth quarter last year amid strong private consumption and robust investments.

The country’s economic expansion in the first three months was the fastest beating China’s 6.7 percent, Vietnam’s 5.5 percent, Indonesia’s 4.9 percent and Malaysia’s 4.2 percent.

Earlier, BSP Governor Amando Tetangco Jr. said there is no need at the moment to further stimulate the economy after the robust first quarter growth and with the impending rate hike by the US Federal Reserve.

Tetangco said the strong growth in the first quarter was in line with market expectations and builds confidence that the 6.8 to 7.8 percent GDP expansion set by the Cabinet level Development Budget Coordination Committee for this year is achievable.

“This also confirms that policy settings are appropriate right now. We will, however, continue to be mindful, among others, of weather-related developments,” he said.

Agricultural production in the Philippines contracted by 4.53 percent in the first quarter of the year on the back of poor output of the crop and fisheries sector amid the prolonged El Niño and damage caused by typhoons Lando and Nona.

“While El Niño seems to be winding down it could still have residual effects on the crop cycle. In addition we may see the onset of La Niña by midyear,” he said.

Robust growth and the benign inflation environment have allowed the BSP to keep interest rates steady since September 2014. The country’s current monetary policy stance has been kept steady for 13 straight policy-setting meetings since October 2014.