MANILA—Moody's Investors Service on Monday upgraded the Philippines' credit rating to a notch below investment grade, aligning its assessment of the country's debt quality with those of Fitch Ratings and Standard & Poor's Ratings Services for the first time since April 2003.

Moody's cited the country's improved economic and fiscal performance, better growth prospects and stable financial system as keys to the upgrade to Ba1 with a stable outlook from Ba2 with a positive outlook. Moody's had changed the rating outlook to positive...