Moody’s Investors Service yesterday raised the Philippines’ sovereign credit rating to one notch below investment grade, citing the country’s strong economic prospects and stable financial system.
The international ratings service also said a recent breakthrough in peace talks, aimed at ending a decades-long Muslim separatist rebellion in the south of the country, had improved the country’s long-term economic potential.
Moody’s raised the Philippines to “Ba1” from ‘Ba2,” while maintaining the ratings outlook at “stable.”
“Despite the headwinds from softening external demand, the Philippines has demonstrated considerable economic strength and fiscal resilience,” Moody’s said in a statement.
“The country is poised to record a combination of faster growth, lower inflation, exchange rate appreciation and an increase in foreign exchange reserves, while maintaining trend debt consolidation,” it said.
Over the longer term, Moody’s said the peace pact between the government and the Moro Islamic Liberation Front (MILF) signed on Oct. 15 could eventually spur economic growth in the resource-rich conflict zone.
The MILF has been struggling since the 1970s for an independent homeland on Mindanao island in the south. The accord signed this month aims for a final peace deal by 2016, with the MILF controlling an autonomous region.
The upgrade comes after Standard & Poor’s raised the Philippines’ long-term foreign currency credit rating to within one rung of investment grade in July, citing the government’s improving finances.
Moody’s upgraded the Philippines’ credit rating to “Ba2” in June last year.
Bangko Sentral Governor Amando Tetangco said he was “delighted” by the upgrade.
“With the government’s concerted efforts and with the support of the private sector, the Philippines should achieve an investment grade credit rating sooner rather than later,” he said in a statement.
The Philippine economy grew 6.1 percent in the first half of this year and the government is hopeful of maintaining that expansion pace throughout this year.
Inflation averaged 3.2 percent in the first nine months of the year, allowing the central bank to cut interest rates four times.
The benchmark overnight borrowing rate now stands at 3.5 percent, with the overnight lending rate at 5.5 percent.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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