Moody's retains stable Philippine outlook

New York-based global debt watcher Moody's Investors Service has kept its stable outlook on the Philippines despite expectations that it will post the slowest economic growth in Southeast Asia this year. Tom Byrne, Moody's Singapore-based senior vice-president and regional credit officer, said the Philippine rating was last upgraded to Ba3 from B1 last July due to the country's strong payment position and resilient banking system amid the global financial crisis. "A strong external payment position and stable financial system provide time for the government to return to a path of fiscal consolidation, after the effects of the global recession dissipate," he said in the rating firm's latest credit report. A Ba3 rating is three notches below investment grade while a B1 rating is four notches below investment grade. The outlook on the ratings is stable. Byrne said current account surpluses and minimal exposure to the post-Lehman credit panic in the US have boosted official foreign exchange reserves of countries like China, Thailand, and the Philippines to record highs. "External payment positions have strengthened, but renewed capital inflows present policy challenges," he added. Moody's said regional sovereign ratings would likely remain resilient to economic risks as the global economy recovers from the crisis that started in the US and Europe. Regional rating trends were generally positive in 2009 with no downgrades originating exclusively from the global crisis. Economic growth Byrne said Philippine gross domestic product (GDP) would likely expand by 3 percent this year from about 1 percent last year. This year's growth projection from Moody's is the slowest in Southeast Asia compared with Vietnam's 5.7 percent, Indonesia's 5.6 percent, Malaysia's 4.3 percent, and Thailand's 4 percent. It is also below the expected average GDP growth of 4.7 percent of five member-nations of the Association of Southeast Asian Nations or ASEAN-5. Moody's growth forecast this year is within the Philippine government's 2.6-3.6 percent goal. Economic managers earlier said economic output growth had likely slowed to 0.8-1.8 percent last year because of the global economic crisis. After abandoning its commitment to balance the budget in 2008 — two years ahead of the original schedule — the government now expects to hit the goal by 2013. Poor tax collections and unrealized gains from the sale of government assets led to a P6.4-billion budget deficit in November and a worse-than-projected gap of P272.5 billion for the 11-month period, worse than the full-year target of P250 billion. — GMANews.TV