MANILA, Philippines - Moody’s Investors Service has retained the credit rating and outlook of member countries of the Association of Southeast Asian Nations (Asean) including the Philippines.
In a report, Moody’s said it has retained the ratings of Asean countries amid the significant depreciation of currencies in the region this year.
“We maintain stable or positive rating outlooks on the six sovereigns. While export weakness and capital outflows are credit negative, currency flexibility combined with respective governments’ ongoing efforts to improve macroeconomic conditions offsets these trends,” the report said.
For the Philippines, Moody’s has retained its Baa2 rating on a stable outlook.
Moody’s upgraded the country’s credit rating to Baa2 with a stable outlook in December last year.
It has likewise maintained the outlook for other Asean members including Indonesia (Baa3, stable) Malaysia (A3, positive), Singapore (Aaa, stable), and Thailand (Baa1, stable).
According to the rating agency, Asean members have strengthened since the late 1990s.
“Robust global growth and low interest rates facilitated credit improvements. But the external environment is now less supportive, so sovereign credit trends will hinge on whether governments can animate domestic sources of growth without increasing financial risks,” it said.
The report said exports were weak this year across the region due to weak global demand. Commodity exporters in Indonesia and Malaysia experienced the strongest currency pressures.
Moody’s said the Philippines and Malaysia have the largest share of portfolio investments in their investment liabilities.
It explained the Philippines avoided similar outflows due to relatively stable economic and policy conditions.
The debt watcher said reliance on international flows that enter and exit rapidly could exacerbate a country’s exposure to external pressures, particularly at times of global capital market uncertainty.
It could also destabilize domestic economic and financial conditions.
“Capital outflows from the Philippines have been quite mild given its strong economic fundamentals and relatively stable policy outlook,” Moody’s said.
The rating agency also noted relatively low external vulnerabilities in the Philippines, Singapore and Thailand that have supported an appreciation in the currencies compared to their trading partners.
Moody’s said the real effective exchange rate (REER) appreciation in the Philippines and Singapore since 2010 has reduced export competitiveness particularly in the manufacturing industry where competition among regional peers is strong.