Moody’s Investors Service was prompted to give an investment upgrade for the Philippines from Ba1 to Baa3 because of the country’s “robust economic performance,” and sound “fiscal” and “political position” of the government.
Budget Secretary Florencio Abad said that with Moody’s investment upgrade of the Philippines, the inflow of investment into the country will increase.
“With this upgrade, which now completes the investment grade update of the three big ratings firm, I think the Philippines can expect more improvement insofar as our image as an attractive investment destination,” he added.
Socioeconomic Planning Director Arsenio Balisacan, for his part, said that the recent upgrade shows how sound and improved the country’s “economic management” and “development strategy” is.
The credit ratings firm commended the Philippines’ ability to withstand external major shocks such as the United States Federal Reserve tapering, as well as having the ability to “fund itself onshore” because of healthy external payments and liquidity in the Philippine banking system, which attained a “positive outlook” from Moody’s.
However, Moody’s indicated that though the country went up to investment grade, the government debt of the Philippines, as measured against gross domestic product, “will remain higher than most similarly rated peers.”
“[But] we expect the activity of the country, the capability to borrow at reasonable rates will continue and the risk profile of the country will continue to improve,” Abad said.
He also noted that the rating upgrade was driven by optimism on the country’s government, because it is “politically stable” from President Benigno Aquino 3rd’s popularity and his drive for good governance.
“The recent PDAF [Priority Development Assistance Fund] exposé will do the country better because it has to do with intervention of politics, people intervening with the budgetary process . . . it will force legislators to really work on the budgetary process so that there will be no distortion on the government’s priority settings,” the budget secretary said.
“[Interest spending] can only go down especially now the big three agencies upgraded us to investment grade, [to go down]about 15.5 percent for next year,” he said, referring to country’s interest payments going down with the recent investment upgrade.
But Balisacan and Abad said that continued inclusivity of growth remains a challenge. Abad further said that the government is focusing on expansion of the manufacturing and agribusiness sectors to provide jobs that can lead to inclusive growth.
“We need now to sustain the growth momentum by continuing to enhance the investment climate and develop new growth drivers, especially in sectors that can deliver decent, remunerative jobs,” Balisacan said.
“[Challenges] included is ensuring that growth is truly inclusive, [further]investing to industries that will allow people with less skill sets to have jobs, and infrastructure development that will automatically yield jobs for the people,” Abad said.
The budget secretary disclosed that infrastructure outlay toward 2016 will be at P600 billion, as opposed to the present infrastructure budget of P400 billion for next year.
Abad said that the government is also intensifying medium-term and long-term social services, which is more slanted in the implementation of the Conditional Cash Transfer program that will allow students to be able to finish high school, in line with the full implementation of the K to 12 program next year.