Economic managers in the country welcomed Moody’s Investors Service recent assessment of a stable Philippine economy, proof they said that the policies put in place to keep the economy afloat during the Covid-19 crisis are working.
In a statement on Friday, Finance Secretary Carlos Dominguez III said: “Moody’s has apparently recognized that ever since the pandemic broke out last year, the Philippines has endeavoured to strike a balance between accelerated spending on COVID-19 response by boosting healthcare capacity and aiding vulnerable sectors, on one hand, and observing fiscal discipline, on the other, so that the anticipated rise in state expenditure will not result to an unmanageable debt situation.”
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno also reiterated confidence in the local economy after Moody’s analysis.
“The Philippine economy came prepared for a crisis. Our long history of economic reforms strengthened the country’s resources and capacity to absorb shocks. The country’s strong external payments position—evidenced in part by our hefty gross international reserves—which provide adequate buffers against global risks and shocks has helped maintain relative stability despite uncertainty caused by the pandemic,” Diokno said.
Earlier this week, Moody’s released a credit analysis on the country saying the Philippines’ credit profile balances the pandemic fallout on the country’s economic performance and fiscal position against a record of macroeconomic and financial stability, and a stable external payments position.
This differs from Fitch Ratings’ assessment earlier this month, where the credit watcher revised its outlook on the Philippines’ current rating citing the strong impact of the pandemic on the economy, which could potentially result in scarring effects on the country.
The country’s gross international reserves (GIR) hit $106.1 billion in June this year, up from the $84.9 billion seen in June 2019, before the pandemic.
The country’s GIR is the level of foreign exchange holdings that is being managed by the central bank during a given period. The GIR is a crucial component of the economy as it is often used to manage the country’s foreign exchange rate against excess volatility.
“The BSP has done quite a lot of interventions since the onset of the pandemic, having lowered the key policy rate to a historic low and having injected around PhP2.2 trillion to the financial system. Our monetary policy will remain supportive of the economy as needed, until solid evidence of recovery is achieved,” Diokno said.
On the fiscal side, Dominguez said: “Moody’s seems as confident as us that the stimulus package and further reforms carried out by the President in response to the pandemic, including the Corporate Recovery and Tax Incentives for Enterprises (CREATE) and Financial Institutions Strategic Transfer (FIST) laws, as well as those still pending in the Congress, will ensure the Philippines’ recovery from the COVID-19 contagion and its return soon to the path of strong and inclusive growth.”