The Philippines: Credit rating agencies to keep close eye on PHL recovery

  • THE country’s pace of recovery after the crisis will be a key consideration in sovereign rating assessment, according to credit rating agencies.
  • “Against this backdrop, our sovereign ratings will be not solely be determined by the immediate impact on credit metrics this year, but also the extent to which a country’s fundamentals can be restored towards their pre-coronavirus shock levels over the medium-term,” Christian de Guzman, senior vice-president of sovereign risk group at Moody’s Investors Service, said.
  • In May 20, Moody’s affirmed the country’s “Baa2” rating, a notch above minimum investment grade, and kept a stable outlook.
  • Sagarika Chandra, associate director for sovereign ratings — APAC (Asia Pacific) at Fitch Ratings, said their “stable” outlook for the Philippines assumes a decline in fiscal deficit from 2021 onwards when the crisis subsides and the economy recovers.
  • A “stable” outlook signals that a country’s credit rating is likely to be maintained within the next six months to two years.
  • Fitch has downgraded the Philippine outlook to “stable” in May 20 from the “positive” outlook it gave in Feb 20, after factoring in the economic impact of the pandemic. On the other hand, it has affirmed its “BBB” credit rating.
  • Failure to successfully consolidate the deficit and bring down debt levels once the pandemic recedes could be negative for the credit rating,” Ms. Chandra said

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