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BSP and Department of Finance hail stable Moody's rating

by: Mary Christine Galang

Friday, July 21, 2017 |

Moody's Investors Service ("Moody's") decision to maintain the Philippines’ investment grade rating and a stable outlook is a positive statement on the national government’s efforts to achieve economic growth, according to the Bangko Sentral ng Pilipinas (BSP) and Department of Finance (DOF).

A statement released by Moody’s said that the country's sovereign credit rating was maintained at Baa2, which is higher than the minimum investment grade, reaffirming a stable outlook on the rating.

"The decision of Moody's speaks well regarding the favourable path that the Philippine economy continues to tread, partly on account of the price and financial stability that comes on the back of prudent monetary policies and bank supervision," outgoing BSP Governor Amando Tetangco Jr. said in a statement.

"The banking sector, which remains strong and stable, will also continue to support the increasing potential output of the economy as it provides financing for growing investment and consumer demand," he added.

Furthermore, the statement also notes the Philippines' improving debt manageability, with the unconsolidated general government debt decreasing from 47.8 percent in 2009 to 38.3 percent of the GDP in 2016.

Stable PHL credit rating

The country's credit rating is expected to remain stable as economic performance remains to be strong, according to Moody's.

Finance Secretary Carlos Dominguez III said that financial institutions, both domestic and international, have lauded the current administration's commitment to strengthening economic reforms.

He said that the "favourable" rating from Moody's highlights the government’s efforts to sustain economic growth by attracting more investments, and making it more inclusive through increased human capital and infrastructure spending.

Downside risks, such as the Marawi City conflict, could affect and potentially undermine institutional strength and economic performance, according to Moody's.

Dominguez said that the Duterte administration was on top of the situation and expects the conflict to be contained and bear minimal impact.

"This administration continues to take actions to sustain the growth momentum and enhance investor confidence in the economy, and the ongoing efforts toward strengthening national security are testament to this commitment," he said.

Moody's also raised concerns regarding US policies that encourage onshoring of jobs that can have a negative impact on the business process outsourcing (BPO) industry, which is the Philippines' major economic growth driver.

Dominguez asserts the BPO industry's strong position notwithstanding said foreign policies.

"At the end of the day, investors make decisions based on what is good for business. And the Philippines, with its competitive cost, and young and educated workforce, will continue to be a wise investment destination for BPO companies and other enterprises," he said.

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