2018News

Moody’s: PHL risks and opportunities balance each other

By Bianca Cuaresma, August 1 2018; Business Mirror

https://businessmirror.com.ph/moodys-phl-risks-and-opportunities-balance-each-other/

Image Credit to Moody’s

THE Philippine economy is expected to stay the course this year, as certain risks are balanced by opportunities of growth for 2018, an international credit watcher said.

In a statement on Wednesday, Moody’s Investors Service said it is optimistic of Philippine prospects for 2018, as the country’s credit profile remains supported by strong growth and progress on reform.

Earlier this month, the credit watcher affirmed the country’s long-term local currency and foreign currency issuer and senior unsecured debt ratings at “Baa2” and maintained the outlook at stable.

The stable outlook indicates an expectation of an unchanged rating in the next 12 to 18 months.

“Moody’s Investors Service says that the credit profile of the Government of the Philippines [‘Baa2’ stable] is supported by a large and fast-growing economy and continued gains in debt affordability, in part because of revenue reforms,” Moody’s said.

“These positive features are balanced against low per capita incomes and low revenue-raising capacity when compared with other Baa-rated countries,” it added.

The credit watcher further said on Wednesday that it expects the Philippines’s robust economic growth to be sustained over the next few years, as the government’s focus on infrastructure development reinforces the decade-long trend of increasing potential growth.

In its earlier credit action, Moody’s also flagged the rising prices of goods in the country as one of the major risks to the Philippine economy in the near-term.

“The Philippines is buffeted by a number of headwinds that contribute to inflationary pressures. Based in part on the strong track record of the BSP in maintaining monetary and financial stability, Moody’s expects the rise in inflation since the beginning of 2018 to be transitory,” Moody’s earlier said.

However, significant capacity constraints related to the Philippines’s topography, possibly persistent pressure on the currency and capital inflows, and a current-account balance in slight deficit, pose material challenges to policymakers in ensuring that inflation expectations and inflation pressure are contained,” it added.

This prompted the BSP to make stronger monetary-policy hints, with BSP chief Nestor Espenilla Jr. saying they are prepared to pull the trigger on interest rate hikes for the third consecutive time this August.

The Monetary Board is expected to meet on August 9 for their fifth monetary-policy meeting of the year.

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