Moody’s, BSP downplay impact of UN ruling
Lawrence Agcaoili (The Philippine Star) - July 14, 2016 - 12:00am

MANILA, Philippines – Moody’s Investors Service and the Bangko Sentral ng Pilipinas (BSP) downplayed yesterday the impact of the unanimous ruling of the Permanent Court of Arbitration awarding the sovereign rights of several disputed islands to the Philippines instead of China.

Marie Diron, senior vice president at Moody’s, said the decision of the UN-backed tribunal based in the Hague on claims to maritime rights over much of the South China Sea has no immediate sovereign credit implications for the Philippines or China.

“The PCA ruling does not change this assessment because we do not expect the ruling to substantially affect either country’s economy, budget or policy effectiveness. This expectation is underpinned by our baseline assumption that there may be actions or statements that stoke strains temporarily but these will not lead to a marked and protracted escalation of tensions,” Diron said.

Diron said the ruling highlights the long-simmering territorial and maritime disputes in Asia.

“Nonetheless, the dispute does highlight emerging geopolitical issues for the two countries and for the region as a whole,” she added.

She explained “geopolitical tensions could affect countries’ credit profiles if they are likely to have a negative economic impact or if they entail significant fiscal costs or if they hamper policymaking.” 

“Per our sovereign methodology, we assess geopolitical strains as posing a very low risk of weighing on sovereign credit trends in China or the Philippines,” Diron said.

BSP Governor Amando Tetangco Jr. said the financial markets are more affected by the impending interest rate hike in the US as well as the stimulus program being implemented in Japan.

Tetangco said the market is awaiting the action of China in relation to the PCA decision.

“We haven’t actually seen an impact so far. I guess what the market would be looking at is how China is going to react to the decision. At this point market is reacting basically to developments elsewhere, basically from the US and Japan,” he added.

Japanese Prime Minister Shinzo Abe ordered a new round of fiscal stimulus spending after winning the elections over the weekend.

The peso yesterday opened stronger 47.22 to $1 from Tuesday’s 47.32 to $1.

“For instance, in the case of the exchange rate the peso opened stronger and that was because of an improvement in sentiment given the announced additional stimulus to be provided by the Japanese government,” he said.

On the other hand, the BSP chief said the US Federal Reserve is hinting of only one rate hike toward the end of the year.

“In addition to that, the Fed is now seen as not really in a hurry to tighten and may actually increase interest rates towards the latter part of the year once. Remember at the beginning of the year the expectation was four increases,” he said.

Philstar
  • Latest
  • Trending
Latest
Are you sure you want to log out?
X
Login

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

FORGOT PASSWORD?
SIGN IN
or sign in with