Moody’s Investors Service has affirmed the Philippines’ Baa2 credit rating with a stable outlook, reflecting strong confidence in the country’s medium-term growth potential, bolstered by recent business-friendly reforms and ongoing fiscal consolidation efforts.
This affirmation is seen as a significant endorsement of the government’s economic strategy, according to Finance Secretary Ralph G. Recto.
“Moody’s affirmation is another victory for Filipinos as this means greater access to more affordable financing to support our projects. These will create more quality jobs, increase incomes, and reduce poverty incidence in the country,” Recto said.
The Finance Chief also emphasized the importance of maintaining a favorable environment for private sector collaboration, which he sees as crucial for attracting high-impact investments.
“With this credit rating affirmation, we can attract more of these high-impact investments into the country,” Recto added.
In its August 23, 2024, report, Moody’s cited the Philippines’ resilient household consumption, robust public and private investments, and a promising export outlook as key drivers of sustained economic growth.
The rating agency expects household consumption to recover in the latter half of the year as the effects of El Niño diminish and government measures to curb food prices take full effect.
Public and private investments are expected to benefit from economic liberalization reforms that have opened up high-value sectors to foreign investment.
Moody’s also projects an increase in foreign direct investment (FDI) inflows through 2024 and 2025, particularly in the energy, manufacturing, and information and communications sectors.
Additionally, Moody’s has confidence in the administration’s Build, Better, More program, which aims to maintain infrastructure investments at 5% of gross domestic product (GDP) annually.
The report also highlights the recovery of exports, particularly electronic products, growth in the Business Process Outsourcing (BPO) sector, and a rebound in international tourism as factors supporting the country’s growth outlook.
Moody’s further noted that the government’s fiscal consolidation efforts are on track, in line with President Ferdinand Marcos Jr.’s Medium-Term Fiscal Framework (MTFF).
The agency expects the national government’s debt burden to stabilize at around 60% of GDP, while general government debt is projected to settle at approximately 50%.
However, the report cautioned that any failure by Congress to pass the proposed fiscal reform bills could pose a risk to the fiscal consolidation path.
Despite this, the Department of Finance remains optimistic that key tax reforms, including those on value-added tax for non-resident digital service providers and the CREATE MORE (Maximize Opportunities for Reinvigorating the Economy) bill, will be enacted this year.
