By Joann Villanueva
MANILA – Fitch Ratings on Tuesday revised upward from “stable” to “positive” its outlook on the Philippines’ ‘BBB’ credit rating, as it expects continued implementation of sound macroeconomic policies.
In a statement, the credit rater said the sound macroeconomic policy framework is seen to boost “high growth rates with moderate inflation, progress on fiscal reforms that should keep government debt within manageable levels and continued resilience in its external factors.”
Fitch Ratings forecasts a 6.4-percent growth for the Philippine economy this year, and 6.5 percent for 2021, with the growth projection for this year lower than the government’s 6.5-7.5 percent expansion target.
These growth forecasts lean on expectations of strong private consumption and increasing government investment in infrastructure.
It said inflows from overseas Filipino workers (OFWs) and favorable job prospects, along with the drop in the unemployment rate and the accommodative monetary policy, support private consumption.
“On current projections, the Philippines will remain among the fastest-growing economies in the Asia-Pacific region in 2020-2021, well above the current ‘BBB’ median,” it added.
Fitch Ratings said the novel coronavirus (2019-nCoV) and natural disasters, however, pose as downside risks to domestic growth.
“It is still early to evaluate the effects of the outbreak, but the economy appears somewhat less vulnerable than regional peers as tourism accounts for less than 3 percent of GDP (gross domestic product),” it said.
It also believes that the Philippines maintains room for monetary and fiscal easing to offset the potential short-term impact on growth.
The credit rater expects the country’s fiscal profile to improve further in line with the government’s tax reform program, which in turn, is expected to help revenues.
Reforms toward institutional effectiveness, human capital, and business environment are also seen to boost the country’s structural metrics, it added.
The upgrade on the country’s credit rating outlook by Fitch Ratings comes on the heels of the upgrade by Japan’s Rating and Investment Information Inc. (R&I) of its credit rating on the Philippines by a notch from ‘BBB’ to ‘BBB+’ with Stable outlook earlier this month.
In April 2019, Standard & Poor’s (S&P) upgraded its investment-grade credit rating on the country from ‘BBB’ to ‘BBB+’ with a Stable outlook, a notch away from A-level due to “supportive policy dynamics and improving investment climate.” (PNA)