THE Philippines’ macroeconomic profile is stronger than those of its regional peers, debt watcher Moody’s Investors Service said in its latest report.
Moody’s describes macroeconomic profiles of countries according to a scale ranging from ‘Very Weak–’ to ‘Very Strong +.’
The macroeconomic profiles of China, India, Indonesia, and Thailand were assessed a step lower than the Philippines at ‘Moderate,’ while that of Vietnam was four steps lower at ‘Weak–.’
When assessing a sovereign’s macroeconomic profile, the international ratings agency takes into account a host of factors, including economic strength, institutional strength, susceptibility to event risks, and credit conditions.
Moody’s uses a country’s macroeconomic profile, which describes the operating environment for corporate entities, as one of the bases for rating banks.
In its banking report published March 18 and which provided an overview of the Philippines’ macroeconomic condition, the ratings firm said the Philippines remains among the fastest growing major economies in the Asia-Pacific region.
It added that it expects the economy to grow by 6 percent in 2016, faster than the 5.8 percent recorded last year.
“The country’s strong growth results from the continued strength of domestic consumption – fueled by a combination of improving employment conditions at home and relatively stable overseas remittances – as well as healthy public and private-sector investments,” Moody’s said.
The international debt watcher said its relatively favorable assessment of the Philippines’ macroeconomic profile is backed by robust economic growth, comfortable external liquidity, and improved institutional strength.
On external liquidity, the Philippines posted a surplus in its current account estimated at $8.9 billion in 2015, which marked its 13th consecutive year of current account surplus.
Also, the country’s gross international reserves at $81.3 billion as of end-February 2016 were enough to cover more than 10 months of imports.
On institutional strength, Moody’s mentioned the important role played by the Bangko Sentral ng Pilipinas (BSP) in helping maintain a stable macroeconomic environment.
Since 2009, the Philippines has managed to keep inflation below ceiling, the report noted. Last year, inflation stood at a modest rate of 1.4 percent. Manageable increase in prices helps boost consumption and encourages investments.
“The country’s institutional strength has also improved, driven in part by an increasingly credible track record of policy effectiveness by a number of national agencies, especially the central bank,” Moody’s said.
Welcoming the favorable comments from Moody’s, BSP Governor Amando Tetangco Jr. said external risks, including contrasting monetary policies in advanced economies and lackluster global growth, make the job of central banks tougher.
“Nevertheless, despite a challenging global backdrop, the Philippines has managed to keep its macroeconomic environment relatively stable over the years on the back of prudent monetary policy and sound banking supervision,” he said.
“As the Philippines aims to build on its economic gains from the past half a decade, the BSP will help maintain an enabling environment by staying committed to its mandate of price and financial stability,” Tetangco added.