The Philippines yesterday continued to “defy trend” as it received another credit rating affirmation with a stable outlook, despite being under various lockdown measures for the past four months due to the coronavirus disease (COVID-19) pandemic.
Moody’s Investors Service affirmed the Philippines’ credit rating of Baa2 with a stable outlook, which the agency said is a “vote of confidence on the ability of the economy to cushion the effects of COVID-19 and to post a solid recovery over the near term.”
“The rating affirmation and stable outlook reflect Moody’s view that the fortification of the government’s fiscal position in recent years provides a buffer against a rise in public indebtedness due to shocks such as the ongoing global coronavirus outbreak. Relatedly, the track record of prudent economic and fiscal management, and a robust banking system, contribute to the stable access to funding at moderate costs and support prospects for fiscal consolidation and debt stabilization after the shock subsides,” Moody’s said.
Benjamin Diokno, Bangko Sentral ng Pilipinas (BSP) governor, said the affirmation supports the central bank’s view that “the pandemic hit the Philippines from a position of strength.”
“While the economy will contract this year, its prospects for a strong rebound next year and future years are bright,” Diokno said.
Diokno noted as of end-June 2020, Moody’s has downgraded the credit ratings of 18 sovereigns and revised to “negative” the outlook on the ratings of 27 sovereigns.
In May, Fitch Ratings and S&P Global affirmed the country’s BBB and BBB+ ratings, respectively, with both ratings being assigned a “stable” outlook.
In June, Japan Credit Rating Agency upgraded the country’s credit rating by a notch from BBB+ to A-.
Earlier in February, another Japanese credit rating agency, Rating and Investment Information Inc., upgraded the Philippines’ rating to BBB+.
All debt watchers cited the country’s strong fundamentals going into the crisis, the projected solid economic recovery, and gradual return to fiscal consolidation over the near term.
“Complementing these buffers are the prompt, decisive, and extraordinary measures implemented by the BSP and the National Government to save lives and livelihoods, and to make sure we emerge from this crisis stronger than before. The BSP has already done a long list of relief measures, and we stand ready to do more if needed, especially as our policy space and tool kit are far from being exhausted,” Diokno said.
BSP has done a wide range of policy measures, including a cumulative 175-basis-point cut in the policy rate and a 200-bps reduction in the reserve requirement ratio, a P300-billion repurchase agreement with the national government, and a long list of regulatory relief measures.
The regulatory relief measures are meant to help ensure banks stay healthy amid the crisis, and that they are able to appropriately serve clients as well, more so micro, small, and medium enterprises and large businesses that have been hit hard by the crisis.
Favorable credit rating developments have allowed the Philippines to access funding at relatively low interest rates at this difficult time.
These free up resources to fund other important programs and projects, such as the provision of assistance to those whose incomes had been affected by the community quarantine as well as for the economic recovery initiatives.
