Moody’s Investor Service upgrades Philippines to investment grade

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Philippines Moody's Investment GradeOn Thursday, Moody’s Investor Service has finally upgraded Philippines to investment grade, confirming the country’s standing as the Asia’s fastest growing economy.

This upgrade completes the investment grades that Philippines has aspired for after Fitch Ratings recognized the country’s economic standing in March, followed by Standard & Poor’s in May; with Tokyo-based Japan Credit Rating Agency also upgrading Philippines to investment grade last May.

“The upgrade by Moody’s completes the investment grades we aspired for. We can expect improvements in terms of foreign investments and tourism,” Budget Secretary Florencio Abad said in a press conference yesterday.

The Philippines is now rated “Baa3” by Moody’s—a notch higher than the previous “Ba1,” which was considered “speculative.”

Moody’s upgrade, though long overdue is a great news for the country considering the graft and corruption crisis that we are facing right now.

“Good governance is truly good economics,” Finance Secretary Cesar Purisima posted in his facebook account. “The upgrade was due to sound economic policies and the public sector’s push towards good governance,” he added.

As a result of a higher credit rating, our country will have more access to cheaper credit which will translate to a lower borrowing cost for the government, thus more resources can be spend on basic services for the citizenry.

Loan rates of local banks for the public will then be based on the yields of the government debt paper, which means lower interest rates in banks for personal loans, car and housing loans as such.

On the other hand, businesses can now also avail cheaper credits, making it easier for them to expand, thus creating more jobs for the public.

“Because of the investment rating upgrade, interest payments should be lower than what was originally programmed for 2014,” Abad said. “We expect the ability of our country to borrow from abroad to improve even further as the country’s risk profile also has improved,” he added.

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. also stressed that Moody’s upgrade should spur investments, which would lead to the creation of more jobs.

“Greater investments should strengthen the base for sustained and inclusive economic growth and usher in a transformative period for the Philippine economy,” Tetangco said.

Apart from the investment upgrade, Moody’s also revised its Philippines’ government debt rating outlook to positive, signaling another possible upgrade in a year or a year and a half.

“The Philippines’ economic performance has entered a structural shift to higher growth, accompanied by low inflation,” Moody said.

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