MANILA – Fitch Ratings has affirmed the Philippines’ investment grade rating of ‘BBB’ with stable outlook as a long-term foreign currency debtor.
The country’s growth prospects remain favorable, supported by strong domestic demand and increasing infrastructure investment, the New York-based credit rating agency said Thursday.
“The ratings on the Philippines balance favorable growth prospects, lower government debt, and a net external creditor position against lower per capita income levels, a weaker business environment and lower standards of governance compared with its rating category peers,” said in a
In breaking down Fitch’s ratings system, Investopedia noted that a ‘BBB’ rating means “low expectation of default.”
While maintaining the country’s investment grade rating, Fitch noted there are existing risks against the Philippine economy.
“However … overheating risks remain in place, highlighted by rapid credit growth and a widening current-account deficit, although the central bank’s stated intention is to remain vigilant against developments that could affect the inflation outlook.”
Fitch said inflation pressures now appear to be easing, partly due to recent monetary policy tightening and easing of some supply-side pressures.
“We forecast GDP growth to remain strong in 2019 and 2020 at around 6.6 percent, supported by robust private consumption and public investment,” it said.
“The affirmation … is a vote of confidence on the country’s fiscal management and the economy’s overall performance and fundamentals,” Michael Ricafort, lead economist at Rizal Commercial Banking Corp. told GMA News Online.
That vote of confidence may also be cast on priority fiscal reform measures in place to structurally improve tax collections and better manage fiscal spending as well as the budget deficit and debt levels within internationally accepted standards, Ricafort said.
“The country’s credit ratings, currently a notch above investment grade (after earning its first ever investment grade more than five years ago in early 2013) would continue to make the country more attractive to international investors,” he added.
Fitch noted that inflation fell to 6 percent in November, after peaking at 6.7 percent in October.
The inflationary concerns were addressed by a combination of policy rate increases, easing of supply-side constraints on rice availability, and some moderation in commodity prices.
“Fitch expects full-year inflation to average 5.2 percent in 2018 and to decline to within the central bank’s target range of 2percent-4 percent in 2019 and 2020 as the cumulative rate increases of 175 basis points during 2018 take effect and as the impact of excise tax hikes in 2018 dissipates,” the credit rating agency said.
For Filipinos at large, this means that the government would be able to get more and cheaper financing, especially for higher government spending on social services and major infrastructure projects. “These would help sustain economic growth and development,” Ricafort noted.
More foreign direct investments into the country, as a result of sustained investment grade rating, will also create more jobs and business opportunities in the domestic economy, he added. (GMA News)
