PHL investment grade rating from Moody's to attract more investors

Thursday / October 3, 2013


The Philippines on Thursday received its third investment grade rating from a major debt-watcher, Moody's Investors Service, a development which solidified the image of the southeast Asian economy’s status as the latest investment hub of the world.
In a statement, Moody's Investors Service said the Philippine sovereign credit rating was raised to investment grade with a positive outlook, citing a robust economic performance in the face of an ongoing fiscal and debt consolidation as well as political stability and improved governance.
The Philippine rating was upgraded to Baa3 from Ba1.
The positive outlook means another upgrade from Moody's could easily be obtained if the reforms and the efforts toward fiscal changes for the better do not lose steam.
An investment grade lowers the costs incurred by a government in issuing debt papers to bankroll development projects.

"The Philippines' economic performance has entered a structural shift to higher growth, accompanied by low inflation," Moody's noted in an e-mailed statement.
The Philippine economy grew by 7.6 percent in the first half, the fastest in Southeast Asia, while inflation remains below the Bangko Sentral ng Pilipinas target of 3 to 5 percent.
"The new growth path is being reinforced in part by improved fiscal management. Revenue growth has accommodated sizeable increases in infrastructure and social spending, although revenue generation remains weak when compared with investment-grade countries overall," according to Moody's.

At a press conference in Malacañang Thursday, Communications Secretary Ricky Carandang told reports this last of the "Big 3" credit rating upgrade erased any doubt as to the creditworthiness of the Philippines. "It is a continuation of the confidence that the international community has in the fiscal management of President Aquino and his team," he said.

Removing the "political noise" surrounding issues hounding the country today will reveal the reforms the administration have been working on "are actually positive in terms of improving the country’s credibility and its creditworthiness," the Palace official added.

'Rosy outlook'
Victor Abola, senior economist at University of Asia and the Pacific, also said three investment grade ratings from the major debt watchers cements the Philippines' "rosy outlook in investors' eyes."
Earlier this year, Philippines received an 
investment grade rating from Fitch Ratings and Standard & Poor’s, while Japan Credit Rating Agency raised the Philippine sovereign rating by  two notches above investment grade.
Moody's noted Manila’s ability to ride external headwinds like the market volatility induced by developments over the US Federal Reserve bond-purchasing stimulus.
"In addition, the stability of the Philippines' funding conditions - during the recent bout of market volatility in emerging markets - points to the country's relative lack of vulnerability to external financial shocks," the debt-watcher said.
The Philippines holds a healthy payments position of over $83 billion, largely buoyed by overseas Filipino remittances and receipts from the business process outsourcing sector.
While inquiries on investing  in the Philippines will increase, Abola said, "This still has to be translated to actual investments."
Abola noted a stable business environment through "observing the rule of law" is still needed.

For Bangko Sentral ng Pilipinas, the debt-watcher gave the blobal community of investors a heads up on the strengths of the Philippine economy.

“Clearly, Moody's  has  acknowledged the strong upside potentials and the constructive dynamics of the economy that should enable it to ride out the volatilities in global financial markets,” Bangko Sentral Gov. Amando Tetangco Jr. noted in an e-mailed statement.

“This development should bode well for more investments, both local and foreign, in the country. Greater investments should strengthen the base for sustained and inclusive economic growth and usher in a transformative period for the Philippine economy,” Tetangco added.

The upgrade from Moody's, however, "should not affect us significantly as markets also priced us as investment grade,"Eduardo V. Francisco, BDO Capital and Investment Corp. president, told GMA News Online.

"Having said that, it will help reduce jitterz from potential US shutdown,"he added.

COL Financial Group Inc. president Conrado Bate noted the market-moving impact of the Moody’s announcement. "As you can see, the market reacted positively after Moody's announcement as this signal's confidence in the Philippines," he said.
"The upgrade to investment from the last global ratings agency will have three effects. First, investors will start to look at the Philippines as an investment place. Second, borrowing will be easier as rates will be cheaper. Finally, we'll have access to funding projects as investments come in," Bate added.

In a briefing Thursday, Budget Secretary Florencio Abad acknowledged that the government still needs to ensure that economic growth must be felt in all sectors of society.

“The remaining challenge: ensuring the growth to be truly inclusive and the impact on the sector that really needs jobs,” he said.

“At the same time, not very much emphasized in the Moody’s report but nonetheless a growing concern is the prospect of being able to continue with this growth beyond the president’s term,” Abad added.

The government, Abad said, is focusing on certain regions where incidence of poverty is high.


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