Moody’s Raises PH Outlook to Positive

Budget and Management Secretary Florencio B. Abad has expressed elation over the recent change in outlook by Moody’s Investor Service on the Government of the Philippines’ Ba3 foreign and local-currency bond ratings from stable to positive.

“Our country is now benefiting from the impact of our reforms towards good public expenditure management. And through our continued efforts to ensure the judicious use of public funds, we will ensure that we will get an upgrade in our credit ratings,” said Abad. “The Moody’s positive credit outlook, by and large, could be taken to represent the buoyant stance by the investing community on our country and our government’s leadership. This is an indication of how the Aquino government has strategically positioned the country towards development through good governance.”

He added that if the country’s credit ratings are indeed upgraded, the government can ensure more certain access to affordable financing for its critical development programs and projects.

In a statement issued on Thursday, Moody’s said the key drivers for the change in outlook are:

  • the strengthening trend in the Philippine’s external payments position which has significantly reduced the vulnerability of government finances to external shocks;
  • the successful conduct of monetary policy which has anchored inflation expectations and has also helped to lower the government’s cost of funding; and
  • improved prospects for economic reform policies which will likely have positive effects on government finances, investor sentiment and economic growth. The credit rating agency also cited, as a reason for the positive outlook, “Prospects for greater political stability following the unambiguous outcome of the May 2010 presidential elections has added further momentum to the resilient economic growth by encouraging greater inflows of foreign direct investment and in boosting domestic consumer confidence.”

Moody’s also cited a notable turnaround in fiscal management in its first semester in office, as the cumulative fsical deficit over the second half of 2010 is expected to be half the size of the deficit in the first half, due to judicious public expenditure.

The positive credit outlook could mean that Moody’s is likely to increase the country’s credit rating given certain conditions. These include continued judicious expenditure and improved revenues, positive developments in the Public-Private Partnership program, and the central bank’s capability in dampening inflationary pressures.

Department of Budget and Management


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