Moody’s joins Fitch, S&P in investment upgrade for Philippines

MANILA - Moody’s has upgraded the Philippines by one notch to investment grade (Baa3), following similar moves by Fitch in March and S&P in May. Moody’s also upgraded the outlook to positive, citing the Philippines’ “robust economic performance, ongoing fiscal and debt consolidation, and political stability and improved governance.”

Over the past couple of years the Philippines has surpassed Indonesia as Southeast Asia’s star performer. Last year the economy grew by 6.8% (second only to China), and growth accelerated to 7.6% during the first half of 2013 on strong private consumption and investment. GDP growth has benefitted from sound fiscal management (the budget deficit is currently around 2% of GDP) and strong economic fundamentals, including a substantial current account surplus (around 3½ % of GDP) and high foreign reserves.

Moody’s says the key to sustaining growth over the medium term will be success in upgrading infrastructure, tackling rising unemployment (7.3% at present), and continued reductions in public debt (51% of GDP). In the meantime, the Philippines appears set to grow by around 7% this year, with some moderation in 2014.