Moody’s Investors Service allayed fears of contagion affecting the Philippines as neighbors in the region report slowing growth, saying the $285-billion economy has thus far proved resilient.
Moody’s, however, warned the country’s growth potential is being hampered by fiscal bottlenecks and weak spending that could harm the country’s local output, measured as the gross domestic product (GDP).
In a paper Moody’s released on Monday, the ratings firm said the country’s ‘Baa2’ rating is shielded from the negative effects of the volatility affecting the country’s neighbors and other emerging markets elsewhere.
As a result, Moody’s reaffirmed its “stable” outlook on the Philippines to indicate that its credit stature should not be unduly influenced by all these events happening over the near term.
“The Philippines’s ‘Baa2’ government bond rating reflects the economy’s resilience to the current headwinds buffering neighboring countries and emerging markets as a whole,” Moody’s said.
“At the same time, the risks to external liquidity and funding conditions for the government arising from the prospective tightening by the US Federal Reserve are manageable,” it added.
The country was seen able to maintain resilience due to strong domestic demand that acts as a cushion against weaker exports.
Moody’s also said that, while political noise has increased ahead of the elections next year, this should not reverse the institutional reforms adopted and other successes thus far achieved.
“Reform momentum has largely been sustained, leading to improved assessments of competitiveness and governance,” it said.
Despite the positive remarks on the country’s strength, the international credit watcher forecast growth averaging 5.7 percent “in line with similar adjustments for several other countries in the region.”
This developed as issues surrounding the disbursement of public funds for infrastructure buildup and other programs continue to be unresolved.
“Bottlenecks in fiscal expenditure have continued to weigh on growth and could threaten the government’s capacity to meet its goal of increasing infrastructure spending to at least 5 percent of GDP by 2016,” Moody’s said.