Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno is confident that the Philippines is not at risk of losing its stable credit ratings outlook with the recession because of the country’s sound macroeconomic fundamentals that will propel the anticipated strong recovery next year and in 2022.
Diokno said it is “highly unlikely” that the three global rating agencies Fitch Ratings, Moody’s Investors and S&P Global will downgrade the country’s sovereign ratings after reporting a dismal second quarter GDP, which resulted to the government revising the full-year projection to a deeper contraction of five percent from the previous two to 3.4 percent.
“The sharp fall in the second quarter GDP does not pose a danger to the Philippines’ strong macroeconomic fundamentals,” said Diokno, citing the low debt-to-GDP ratio and that the government has “one of the highest tax effort in the region.”
Diokno said the manageable inflation and inflation expectations, the strong local currency, “hefty” reserves of $93 billion and the well-capitalised banking system with low non-performing loans, are just some of the fundamentals that will support the pandemic response and economic recovery.
Diokno also reiterated his often repeated statement that the rating agencies have already downgraded and given negative outlook revisions, but sparing the Philippines.
“From January to June, the rating agencies (Fitch, Moody's and S&P) have downgraded 82 sovereigns, revised to negative outlooks 104 sovereigns. The Philippines is not one them. The ratings agencies have affirmed the Philippines’ investment grade ratings and outlook,” he said.
Moody’s just this July has affirmed its “Baa2” ratings with outlook “stable”, following
the Japan Credit Rating Agency’s June upgrade from “BBB+” to “A-”. It was the Philippines’ first A-rating. S&P and Fitch have also affirmed their rating of “BBB+” and “BBB”.
“The economic managers view the economy's plunge in the second quarter as temporary resulting from the strict and comprehensive lockdown during the period owing to the coronavirus pandemic. But the recovery process is on its way and we expect a strong rebound of 6.5 to 7.5 percent in 2021,” said Diokno.
“We should look beyond the current crisis,” he added. “We should craft a strong economic recovery program accompanied by more structural reforms that would allow the Philippines to rebuild better for the future.”