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Moody’s rates euro bond a Baa2

Joshua Lao



Moody’s Investor Service, one of the biggest sovereign credit watchers in the market, affirmed the investment tag on the country’s proposed euro bonds, which are eyed as additional funding source for the government’s development programs.

The Philippines’ stable issuer rating outlook reflects the country’s strong economic performance

“(Moody’s) has assigned a Baa2 senior unsecured rating to the euro-denominated global bond offering by the Government of the Philippines, maturing in 2027,” the credit watchdog said of the country’s proposed bond sale which also carries a stable outlook.

“The bonds are direct, unconditional and unsecured obligations of the government of the Philippines and will rank (side by side) with all other senior unsecured debt obligations of the issue,” it added.

The rating represents an investment grade a notch above the minimum investment level serving to affirm earlier expectations.

According to Moody’s, the Philippines’ stable issuer rating outlook reflects the country’s strong economic performance, its strengthening fiscal position and limited vulnerability to external shocks.

“The Philippines’ relatively large economy and high growth potential supports its capacity to absorb shocks. The country’s favorable demographics support steadily rising labor inputs and potential growth, while keeping the burden of aging-related costs on government finances low,” the credit watcher said.

“At the same time, the Philippines’ per capita income, which is lower relative to peers, at roughly $8,900 in 2018 at purchasing power parity compared with around $25,000 for the median Baa-rated sovereign, is an important constraint on both economic strength and the rating,” it added.

The credit watcher noted the country’s strong fiscal and macroeconomic underpinnings and hinted of the possibility of a rating upgrade should additional proposed reforms are completed and performance hurdles are met.

“Moody’s would consider upgrading the Philippines’ sovereign rating if there was a marked convergence of per capita incomes and revenue generation and as a result debt affordability, with higher-rated peers,” it said.

“This could materialize over time as the government makes greater progress on its reform agenda, including addressing weaknesses in infrastructure, increasing competitiveness and the ease of doing business and developing sustainable and inclusive growth,” Moody’s added.