Article Analysis

2. Identify the sovereign credit rating and grade of the Philippines from the three rating
agencies. (15 points) Explain the differences in ratings if any exist.
Rating Agencies
* Standard & Poor's credit rating for Philippines stands at BBB+ with stable outlook.
* Moody's credit rating for Philippines was last set at Baa2 with stable outlook.
* Fitch's credit rating for Philippines was last reported at BBB with negative outlook.
Standard & Poor and Moody’s credit rating for the Philippines is the same, having a stable
outlook. While Fitch’s credit rating report has negative outlook.

3. Discuss the differences between the three ratings. Highlight how these ratings can affect
trade relations between countries. (30 points)
- S&P Global Ratings has retained its credit rating for the Philippines despite the immense
COVID-19 health crisis, noting the national economy is “beginning to recover.” The global debt
watcher said it affirmed its “BBB+” credit rating for the country. A notch closer to the minimum
rating for the “A” level, this attests to the national economy’s stability and the government’s
ability to pay its loans. A better rating allows nations to avail cheaper debts overseas.
- Moody’s Investor Service kept the Philippines’ “BAA2” credit rating with a “stable” outlook,
as economic recovery is unlikely to be hampered by “challenging global credit conditions.” It
said the Philippines remained fundamentally strong with regards to the stability of its banking
system and the capacity to meet external debt repayments, notwithstanding cyclical pressures on
the balance of payments and consequent exchange rate depreciation. Moody’s said the economic
rebound has been strong, adding the Philippines would be resilient amid near-term global credit
tightening.
- Fitch Ratings has affirmed Philippines' Long-Term Foreign-Currency Issuer Default Rating
(IDR) at 'BBB' and revised the Outlook to Negative from Stable on July 12, 2021. Because of
some factors including the Philippines economy has been hit particularly hard by the Covid-19
pandemic and contracted by 9.6% in 2020 ; GDP in 1Q21 shrank by 4.2% yoy, dragged down by
reduced private consumption (-5% yoy) and investment (-18% yoy) ; Philippines' structural
indicators remain weaker than peers', including per capita income, governance standards and
human development Fitch's sovereign rating committee decided not to adopt the score indicated
by the SRM as the starting point for its analysis.
- These ratings may affect trade relations between countries as these ratings would be their basis
whether to invest in the Philippine local market, considering their GDP’s, economic growth, and
national debt amidst pandemic.

4. Justify which agency rating will favor the Philippines in terms of investment decisions
(15 points).
- In general, a credit rating is used by sovereign wealth funds, pension funds and other investors
to gauge the credit worthiness of Philippines thus having a big impact on the country's borrowing
costs. I think in terms of investment decisions, the Standard & Poor’s rating will favor the
Philippines, maintaining a positive and stable outlook, it is undeniably true that little by little, the
Philippines is now gaining a growth again amidst being hit by the pandemic. Also, foreign
investors keep on investing and same with the international trade.
References:
https://www.officialgazette.gov.ph/report/credit-ratings/
https://www.fitchratings.com/research/sovereigns/fitch-revises-philippines-outlook-to-negative-
affirms-at-bbb-12-07-2021
https://www.cnnphilippines.com/business/2021/5/27/S-P-maintains-PH-credit-rating-economic-
recovery.html
https://www.bworldonline.com/top-stories/2022/09/16/475030/moodys-affirms-phl-credit-rating/