Finance Secretary Ralph G. Recto has welcomed Moody’s recent affirmation of the Philippines’ Baa2 rating with Stable outlook, which reflects strong confidence in the country’s high medium-term growth potential due to the enactment of investment-friendly reforms as well as the government’s continued fiscal consolidation efforts.

“Moody’s affirmation is another victory for Filipinos as this means greater access to more affordable financing to support our projects. These will create more quality jobs, increase incomes, and reduce poverty incidence in the country. With our growth-enhancing fiscal consolidation plan in place, we ensure that we have adequate fiscal space to invest on infrastructure, education, human capital development, and social protection programs, which have the high multiplier effects on the economy,” the Finance Chief said.

“We also put greater emphasis on creating a better enabling environment for stronger private sector collaboration so we can bring in more investments and technology, create high-quality jobs, and spur industry development. And with this credit rating affirmation, we can attract more of these high-impact investments into the country,” he added.

With the latest affirmation, the Philippines has successfully maintained its high investment-grade status across all major regional and international debt rating agencies, with two coveted A- ratings from Japanese rating agencies.

In its report on August 23, 2024, Moody’s expects the Philippines’ economic growth to remain high due to its resilient household consumption, public and private investments, and increased exports.

Household consumption is seen to recover in the second half of the year as the impact of El Nino fades and the government’s interventions to reduce food prices take full effect.

Public and private investments are supported by the economic liberalization reforms that have been passed over the years, which have opened up high-value sectors to foreign investments.

The credit-rating agency expects foreign direct investments (FDI) inflows to continue to pick-up in 2024 to 2025, driven by strong investor interest in the energy, manufacturing, and information and communications sectors.

Moody’s is also confident that the administration’s Build, Better, More program will help sustain infrastructure investments at 5% of gross domestic product (GDP) annually.

Meanwhile, exports of goods and services will support the country’s growth outlook due to the recovery in exports of electronic products, a gradual growth in Business Process Outsourcing (BPO) sector revenues, and a rebound in international tourism.

Moody’s likewise expects the country’s fiscal consolidation to continue in line with the Marcos, Jr.’s Medium-Term Fiscal Framework (MTFF).

In particular, the agency expects the government debt to stabilize to the level of its regional peers, with national government debt burden settling at around 60% of GDP and general government debt at around 50%.

The government’s fiscal consolidation will be supported by improved revenue and expenditure reforms over the course of 2024 to 2025.

Moody’s noted that Congress’ failure to pass the proposed fiscal reform bills will be a downside risk that would derail the fiscal consolidation path.

The DOF has been closely working with Congress and is confident that most of the priority tax reforms will be passed this year, starting with the bills on value-added tax on non-resident digital service providers and the CREATE MORE (Maximize Opportunities for Reinvigorating the Economy), among others. These reforms will not only improve revenues equitably but will also enhance the country’s business environment.