Moody's affirms Philippine credit rating at 'Baa2' with 'stable' outlook

Global credit watcher Moody's Investor Service on Thursday affirmed the Philippine credit rating at 'Baa2' with a stable outlook, as it noted the country's buffer against a rise in public indebtedness.

In a statement, Moody's kept the Philippines' long-term local and foreign currency issuer and senior unsecured debt ratings at Baa2, one notch above the minimum investment grade.

"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," it said.

"Relatedly, the track record of prudent economic and fiscal management, and a robust banking system, contribute to stable access to funding at moderate costs and support prospects for fiscal consolidation and debt stabilization after the shock subsides," it said.

Under the Moody's Long-Term Rating definitions, Baa obligations are subject to moderate credit risk, and are considered medium-grade and as such may possess speculative characteristics.

The Department of Finance (DOF) earlier this month said borrowings have reached P1.22 trillion in the first four months of 2020, as the administration ramped its reliance on lending to fund the COVID-19 response and economic relief initiatives.

Finance Secretary Carlos Dominguez III assured, however, that the Philippine borrowing policy was "conservative" even as more loans are currently being processed to boost the country's war chest against COVID-19.

"The stable outlook reflects the view that the recovery from the acute shock posed by the coronavirus outbreak will restore rapid economic growth relative to peers, complemented by the stabilization and eventual reversal of the deterioration in fiscal and debt metrics," said Moody's.

Moody's flagged, however, that the emergence of macroeconomic instability could lead to a downgrade moving forward.

"The reversal of reforms that have supported prior gains in economic and fiscal strength would also likely lead to a downgrade," it said.

"A material deterioration of institutions and governance strength, with signs of erosion in the quality of legislative and executive institutions, would also be negative," it added.

To recall, the Philippines scored an "A-" credit rating from the Japan Credit Rating Agency Ltd. (JCR) in June.

However, the country's highest credit rating so far from a major ratings agency is a "BBB+" rating from S&P Global Ratings on the country's long-term sovereign credit rating.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno in 2019 said the 'A' rating could be achieved in the next two years, but he has since backtracked and said this may no longer be the case.

Diokno in May said the quest for an 'A' credit rating will have to take a backseat while the government focuses on providing assistance to those hit by the pandemic. -NB, GMA News