Moody’s: Q4 improvement ‘credit positive’

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The Philippines’ fourth-quarter growth improvement, to 6.3 percent from 6.1 percent three months earlier, has been deemed “credit positive” by Moody’s Investor Service.

“The strong growth is credit positive because it demonstrates the economy’s resistance to global shocks and points to the government’s ability and willingness to shore up domestic demand amid a weak external environment,” Moody’s said in a report on Monday.

The debt watcher currently rates the Philippines a notch above minimum investment grade.

Moody’s pointed out that the strong fourth-quarter performance came at a time when weak global demand was slowing growth in export-oriented Asian economies. It said the result put the Philippines in a more robust position to weather further global economic and financial market volatility.


Moody’s noted that government consumption and investment surged in the second half of 2015 after restrained public spending had capped growth in the first semester.

The fiscal space built up in recent years has given the government the ability to shore up growth without affecting the trend of declining government debt, it added.

“The government’s ability to ramp up spending in the current volatile global environment also points to improving budget execution,” Moody’s said.

Consumer spending, it noted, remains a key growth driver.

“Households benefit from lower inflation and relatively stable overseas remittances, which, along with a 5.4 percent depreciation of the peso against the US dollar in 2015, have boosted the purchasing power of the funds sent home by overseas Filipinos,” Moody’s said.

It also pointed out that low household debt compared with many regional peers offered scope for further increases in consumption.

While the Philippines has not been immune to China’s slowdown, the country is less reliant on Chinese demand than many of its regional peers, Moody’s said.

“Whereas many Asian countries count China as their largest export partner, it is the Philippines’ fourth-largest export destination. The Philippines is also much less dependent on commodity receipts for exports or fiscal revenues than its regional peers,” it said.

Moody’s also said that robust demand for Filipino services such as business process outsourcing and tourism, which the government has sought to promote, had also offset weak demand for merchandise goods.

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