THE country’s credit profile “balances” the adverse impact of the Covid-19 pandemic on its economic performance and fiscal position, Moody’s Investors Service said in a report.
The global credit watcher, in a statement on Monday, said the Philippines was able to maintain “strong debt affordability” despite its borrowings piling up in the pandemic. Moody’s gave the country Baa2 credit rating with stable outlook.
As of end-May, the national government’s outstanding debt increased by 24.5 percent to P11.07 trillion from P8.89 trillion year-on-year, according to data from the Bureau of the Treasury.
“Pandemic risks have weighed on the Philippines’ economic recovery compared with its more export-oriented peers in the Asia-Pacific, delaying fiscal consolidation and raising the prospects for long-term economic scarring. In particular, the revival of private investment would depend on a sustained restoration of business confidence,” said Christian de Guzman, a Moody’s Senior Vice President.
The Moody’s unit said the stable outlook for the Philippines means that the recovery from the pandemic will allow “rapid economic growth compared with its peers, complemented by the stabilization and eventual reversal of the deterioration in fiscal and debt metrics.”
“This scenario is balanced against the risk that the economy’s potential is damaged more significantly than we currently assume, or that fiscal and economic reform momentum does not resume, leaving the Philippines economic and fiscal strength weaker, or both,” it continued.
Moody’s said the quick turnaround of the declining fiscal and debt metrics can prompt a rating upgrade. On the contrary, a downgrade is a possibility if the said factors worsen. Based on the report, the credit watcher said the economic contraction last year does not signal a substantial decline in the Philippines’ growth progress.
“Our ‘a3’ assessment of the Philippines’ economic strength balances its large size and fast growth over the past decade against low-income levels compared with investment-grade peers,” it explained.
It noted that the recession was caused by the government-imposed pandemic lockdown measures, in addition to weaker external demand.