The recent affirmation of credit watchdog Moody's Investors Service is expected to support the sustained recovery of the domestic economy, BSP Governor Felipe Medalla said.

"The Bangko Sentral ng Pilipinas continues to have the necessary monetary policy tools to address the current challenges of tighter global financial markets and volatile exchange rates and ensure our return to a target-consistent inflation path," Medalla said over the weekend.

The governor has welcomed Moody's recognition of the country's well-capitalized banking system, which continues to provide the funding needs of businesses and households.

Recently, Moody's has affirmed the Philippines' investment-grade credit rating of "Baa2" with a "stable" outlook because of the Philippine economy's sustained recovery and sound fundamentals, as well as the country's economic policy continuity.

Challenging conditions

"The rating action is driven by its views that the challenging global credit conditions will not derail the Philippines' ongoing recovery from the pandemic," Moody's said.

Moody's added that among the key reasons for the decision is the country's fundamental strength in its banking system and its capacity to meet external debt repayments, notwithstanding cyclical pressures on the balance of payments and consequent exchange rate depreciation.

Moreover, the governor said an investment grade rating indicates lower credit risk, thus allowing a country to access funding from development partners and internal capital markets at a lower cost to the public.

Medalla added that this enables a country to channel funds that would have otherwise been allotted for interest payments to socially beneficial programs and projects.

For his part, Department of Finance Secretary Benjamin Diokno underscored that Moody's affirmation of the Philippines' Baa2 rating comes amid a wave of credit rating downgrades of economies made vulnerable by the pandemic.

Sustained implementation of reforms will further strengthen the country's fiscal position, the secretary added.

The finance chief and head of the economic team also emphasized the government's commitment to pursuing the Medium-Term Fiscal Framework and the legislative priorities of the Marcos administration's socioeconomic agenda.