MANILA – Moody’s Investors Service on Tuesday maintained its Baa2 investment grade rating with a stable outlook for the Philippines despite cutting its 2020 growth output due to the impact of the coronavirus disease 2019 (Covid-19) pandemic.
Moody’s now forecasts the country’s growth, as measured by gross domestic product (GDP), to be at 2.2 percent, down from its earlier projection of 2.5 percent.
“For the Philippines, we expect real GDP to decline 2.5 percent in 2020, the first full-year economic contraction since 1998,” it said.
Its forecast growth for the domestic economy this year is better than the government’s revised forecast of -0.8 to zero percent.
The debt rater, however, kept its ratings and outlook for the economy.
“Moody's expects the Philippines' real GDP growth to remain robust relative to peers and that its fiscal metrics will continue to strengthen as the government continues to make progress on its socioeconomic reform agenda, particularly on tax reform,” it said.
Despite the negative external environment due to the pandemic, which will hurt exports, remittances from overseas Filipino workers (OFWs), and tourism, among others, the debt rater expects the country’s current account deficit to remain narrow because of lower oil prices and subdued import demand because of weaker global growth.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno dubbed Moody’s decision as a “vote of confidence in the country’s macroeconomic fundamentals and the way the Philippine government is managing the coronavirus pandemic.”
Diokno reiterated that the global health crisis “hit the Philippines from a position of strength” because the government has “ample fiscal and monetary space.”
“While the economy is likely to contract this year, the contraction would be less severe compared to most economies in the world. In fact, barring a second wave of infections, I expect the Philippine economy to have a strong rebound, estimated at 7.8 percent in 2021,” he told journalists in a Viber message.
Also in a Viber message, Finance Secretary Carlos Dominguez III said Moody’s latest credit opinion “validates the resilience of our most fundamental strength: a young and productive labor force, a responsible approach to debt management, conservative economic and fiscal policies, and an emphasis on infrastructure and human capital development in our government priority programs.”
Dominguez said he expects the country’s credit rating to remain “buoyant” because of the government’s “commitment to fiscal and economic reform.”
He said Moody’s rating opinion, along with The Economist’s report ranking the country as sixth among 66 select emergency economies in terms of a high level of financial strength, is a “vote of confidence in our financial strength.”
“These reviews demonstrate the international community’s enduring belief in our ability to defeat Covid-19 and bounce back from this pandemic. This confidence will make it easier for us to find the resources and build partnerships that can help resolve this crisis decisively,” he added. (PNA)
