Silver lining in declining GDP growth with Moody’s ratings upgrade.

Cebu, PHILIPPINES, Dec 11, 2014 – Moody’s Investors Service today raised the credit rating of the Philippines to a stable Baa2, one notch above investor grade, citing a drop in the government’s debt burden.

Only last week, disappointing GDP growth rate figures were released by the government, partly due to a slowdown in the public investment in infrastructure following the DAP (disbursement acceleration program) controversy. However, if taken from a different perspective, this led to an 86% reduction in the government’s budget deficit through 2014, and a 28.3% drop in debt servicing costs, which has boosted investor confidence in the ability of the Philippine economy being able to handle financial shocks.

Moody’s decision, which now brings their assessment in line with Standard & Poor’s recent upgrade, was driven by this improvement in the Philippine debt profile, as well as what they saw as a strong likelihood of robust economic growth in the near term, and resilience to risks other emerging markets have been recently subjected to.

In response, the Philippine peso strengthened 0.4% against the US dollar, to close at 44.493, the highest mark since September 29. Tokyo-based Rakuten Securities is bullish on their outlook seeing further gains as likely.

BSP (Bangko Sentral ng Pilipinas) kept the rate unchanged at 4.0%, which was predicted, and in line with Governer Amando Tetangco’s policy of stability, “Our efforts to maintain macroeconomic stability made the economy more resilient in the face of challenges essentially coming from the external sector,” he said.

The Aquino government’s stance on anti-corruption and transparency has put it in good stead to resist risk factors currently plaguing other emerging markets, and the Philippine economy has, whether due to political factors or not, not been reliant on Chinese trade, so has been somewhat insulated from the slowing growth of the Asian giant.

 

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