Moody's lifts growth forecast for Philippines yet again

Moody's Investors Service has upgraded its economic growth forecast for the Philippines to 6.3 percent from the earlier estimate of 5.5 percent.

“An improved investment climate that promotes further increases in the capital stock, gains in productivity and employment, and addresses relatively poor infrastructure will help to sustain economic momentum,” Moody’s said in a report.

This was the third revision in the credit rating firm's forecast for the Philippine economy for the year. Moody's originally forecast 4 percent growth in the country's gross domestic product (GDP), then hiked this to 4.7 percent and to 5.2 percent thereafter.

“The increase in the government's expenditures this year has supported economic growth, but the effect on the headline deficit has been mitigated by buoyant revenue performance due to continued gains from enhanced tax administration," Moody's said.

"The primary balance remains in surplus, contributing to sustained debt consolidation. The Philippines' Bureau of the Treasury also continues to proactively enhance the structure of the public debt burden, resulting in lower debt servicing costs and refinancing risks,” the debt watcher said.

Moody's also upgraded the country’s economic strength to "moderate-to-low" from the earlier "low." The rating firm's scale ranges from "very high" to "high," "moderate," "low" and "very low."

The government’s financial strength likewise was rated higher to "low-to-moderate" from "low."

These two factors were “primary drivers of the upgrade,” Moody's said of its higher growth forecast.

The country’s scores for institutional strength and susceptibility to event risks remained the same at "moderate-to-low" and "low," respectively.

“Nevertheless, there have been noticeable improvements in institutional quality reflecting the current administration's focus on good governance, while banking system stability anchors the low likelihood that tail risks affect the government's fiscal position,” Moody’s said.

Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Guinigundo said Moody's higher growth forecast may be a signal to the market that an upgrade was forthcoming.

“This could be a foreshadowing, preparing the market (for the anticipated credit upgrade),” he said in a text message.

Moody’s as well as rival sovereign credit watchers Standard & Poor’s and Fitch Ratings had raised the Philippines' rating to a notch below investment grade.-Interaksyon (December 18, 2012 5:12PM)