Finally, Moody’s upgrade of the PhilippinesBy Randell Tiongson on October 3rd, 2013
Moody’s reason for upgrading the Philippines are as follows: robust economic performance — our economy is now one of the best performing economies not only in Asia but also in the world and we expect to sustain our growth; on-going fiscal and debt consolidation — kudos to the fiscal managers of the country; and finally we are now being viewed as politically stable and have improving governance. In addition, our budget deficit is narrower than Baa3-rated median and that’s a good thing. President’s Aquino’s approval ratings among voters bolsters institutionalization of reforms and good governance is reflected in improving third-party assessments of institutional quality and international competitiveness.Philippine economy is seen to likely continue with its growth and have a continued current account surplus largely due to stronger remittance inflows from overseas Filipinos and services exports, particularly from the business process outsourcing sector. Investopedia has a good definition, click here.
There are many other things that we need to work on such as our external debt, government debt as measured against GDP will remain higher than most similarly rated peers. We also need to see more concrete results from the institutional reforms and consistency in good governance for us the see the nation achieve first world status but I believe that we are on the right path.
One would think that the Philippine Stock Market would have reacted wildly with the upgrade but it did not. As of this writing, the market did go up but very minimally. I can only assume that the market has already discounted the investment grade already or they market is still on a wait and see also. Further, 1 day performance is not long enough to reflect market sentiment. Personally, I see a positive reaction eventually. Our market’s performance is not only based on what’s going on the Philippines, otherwise our index would not be where it is now. Events in US, Italy & China continues to have a negative effect in all markets, the Philippines included. Despite our strong fundamentals and good prospects, I believe the market will continue to reflect that over time — although it may take a longer time than what we are comfortable with. The positive news may just be the stimulus our markets need to bring back buying interest specially from foreign investors.
The investment grade of Moody’s comes in a great time but it just formalizes what we already know and what Fitch and Standard & Poors picked up earlier — that the country is fundamentally sound. We already know that Moody’s will give the upgrade, it was only a matter of when.
Let us continue to pray for the nation so that we can continue to grow and may we never forget the reason and the purpose for all these.
“Blessed is the nation whose God is the Lord, the people he chose for his inheritance.” – Psalm 33:12, NIV