GLOBAL investment firm Goldman Sachs has expressed confidence over the Philippines’ resilience and strong positioning against its credit rating peers in recovering from the pandemic damage, on the back of the country’s low debt burden, expected current account surplus and projected robust and sustainable growth rebound over the next two years.
It said Moody’s Investor Service’s affirmation of the Philippines’ “Baa2” rating with “stable” outlook is a vote of confidence in the country’s fiscal and external buffers plus policy flexibility during crisis, and which the investment firm attributed to the “astute management” by the government’s economic managers.
Todd Leland, Goldman Sachs president for Asia ex-Japan, said in a letter to Finance Secretary Carlos Dominguez III that the investment firm is “delighted to see Moody’s (Investor Service) affirmation of its Republic of the Philippines (ROP)’s stable Baa2 rating” as reflected in the debt watcher’s latest credit analysis report on the country.
“This is reflective of ROP’s relative resilience in view of Moody’s negative rating action on 58 sovereigns globally since the start of the pandemic in March 2020. We believe that this rating affirmation is a vote of confidence on ROP’s fiscal and external buffers, and policy flexibility during crisis periods, thanks to the astute management by its economic team, under your very able leadership,” Leland said.
Reinforced outlook
Leland said Moody’s has agreed with Goldman Sachs’ assessment “of ROP’s strong positioning versus its rating peers globally.”
He said Goldman Sachs based its positive assessment on the Philippines on three factors: 1) “ROP has one of the lowest sovereign debt burden and strongest debt affordability, as measured by its general government debt and interest payments as a share of gross domestic product(GDP)”; 2) “the Philippines is expected to be the only Baa2 country to see a current account surplus this year and next”; and 3) “GDP growth is expected to rebound strongly and sustainably, averaging above six percent over the next two years compared to under five percent for the Baa median.”
In its latest credit analysis on the Philippines, Moody’s said it expects the country to outperform most of the sovereigns it rates in terms of average growth up to 2025.
The international debt watcher cited its 10-year average growth projection for the Philippines for the period 2016 to 2025 at 4.8 percent—despite the sharp contraction last year resulting from the pandemic.
“Although this 10-year average includes the steep recession in 2020 associated with the global coronavirus pandemic, we expect the Philippines to grow faster than nearly 85 percent of rated sovereigns,” Moody’s said in the report released on July 26, 2021.
The debt watcher believes the recession in 2020 does not represent a material weakening of the Philippines’ growth prospects.
For 2021 and 2022, the rating agency placed its growth forecasts for the Philippines at 5.8 percent and 6.5 percent, respectively. It expects the Philippines to restore full-year GDP growth to 2019 levels in 2022, ahead of rating peers like Panama, Uruguay and Mauritius which are expected to revert to pre-pandemic growth levels only in 2023 or beyond.
Higher government spending, such as on infrastructure, will be among the growth drivers for the Philippines this year and next, it said. (PR)