Verdict now unanimous: Moody’s gives Ph its 3rd investment grade rating

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Moody’s Investor Service – the only major international credit rating agency yet to rate the Philippines as investment grade has finally done it last Thursday, October 3.

The Philippines is now rated “Baa3” by Moody’s—a notch higher than the previous “Ba1,” which was considered “speculative.”

From many quarters, the reaction is invariably:  “it’s about time” or “it’s long overdue.”

As early as March this year, Fitch gave the Philippines its first investment rating ever in recognition of its improved economic performance.  Standard and Poor’s followed two months later, in May. 

National Treasurer Rosalia de Leon said “It’s about time” when asked about Moody’s latest rating.

Finance Secretary Cesar Purisima thought the upgrade was long overdue.  He added that “good governance is truly good economics.”

Budget Secretary Florencio Abad said that the”upgrade by Moody’s completes the investment grade we aspired for.”

Purisima said that despite the investment rating from Moody’s, the Philippines actually remains one of the most underrated countries in the world

Credit ratings are used by investors as indications of the likelihood of receiving the money owed to them in accordance with the terms on which they invested. Fitch credit ratings cover the global spectrum of corporate, sovereign (including supranational and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets

In simpler terms, an investment grade rating indicates a well-managed economy in fiscal and monetary terms that serves as an assurance to creditors they will be promptly paid.

Having an investment grade credit rating means the Philippines would be able to haggle for lower interest rates when it borrows abroad since its debt instruments are deemed less risky than that of other countries.

An investment grade would boost investor interest in the country, with more countries likely to consider us as investment destinations.

In a statement Thursday, Moody’s also revised its outlook for the Philippines’ government debt rating to positive, indicating the possibility of another upgrade in the next 12 to 18 months.

“The Philippines’ economic performance has entered a structural shift to higher growth, accompanied by low inflation,” it said.

Moody’s cited the country’s gross domestic product growth in 2012, which clocked in at 6.8 percent. The country’s growth accelerated to 7.6 percent in the first half of the year, outpacing the rest of the Asia-Pacific region.

Moody’s assessment on the Philippines’ growth prospects for the year mirrors the forecast of other international analysts on the country, now seen as one of the few bright spots amid bleak global economic conditions

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Photo: from Moody’s signage from PDI