One of the three major international debt watchers has kept the Philippines’ investment grade credit rating due to the nation's manageable fiscal situation despite the coronavirus-induced recession.
Fitch Ratings said that the growth prospects in the Philippines remain favorable, particularly with the declining number of daily confirmed COVID-19 cases.
For this reason, Fitch Ratings maintained its “BBB” credit rating for the country, which is one notch above the minimum investment grade. Its outlook is also “stable,” which indicates absence of factors that could trigger adjustment in the rating within the short term.
By keeping its credit rating, the Philippines continues to stand out in the international financial community amid a wave of negative credit rating actions, which resulted from adverse impacts of the pandemic on the performance and credit profiles of many economies.
In 2020, Fitch implemented 51 credit rating downgrades affecting 33 sovereigns, some of them were downgraded more than once.
Some countries that previously had the same rating as the Philippines, like Mexico, Colombia, and Italy, were downgraded by a notch to the minimum investment grade of “BBB-”.
In a report, Fitch noted that the Philippines has “modest government debt levels relative to peers, robust external buffers, and still-strong medium-term growth prospects.”
Fitch also said it expects economic recovery in the coming quarters for the Philippines, placing its gross domestic product (GDP) growth projection at 6.9 percent for this year and 8.0 percent for next year.
Reacting to Fitch’s decision, two economic officials welcomed the affirmation of the Philippines' credit rating, which they said a recognition of the soundness of the COVID-19 response measures in the country, as well as the Philippines’ strong fundamentals.
Finance Secretary Carlos G. Dominguez III said the affirmation of the Philippines’ “BBB” rating with a “stable” outlook shows that the country has remained credit and investment worthy throughout the global COVID-19 crisis.”
“This is because, first, our strong economy on the Duterte watch gave us enough fiscal space to deal with the unprecedented health and economic crises,” Dominguez said.
“Second, there is a whole-of-government approach in saving lives, protecting communities and livelihoods, and providing relief to the hardest hit families, workers, and businesses,” he further stated.
“Third, we continued our commitment to prudent fiscal and debt management event as we start spending big on COVID-19 response measures to revive the economy and restore both business and consumer confidence,” he added.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, meanwhile, said they appreciate Fitch’s understanding of the Philippines' credit and macroeconomic direction amid the global pandemic.
“For our part, the BSP was among the first central banks in the world to respond to the crisis with a policy rate cut as early as February last year,” Diokno said.
“We deemed it important to signal to the market that we were ready to act swiftly and decisively to buoy market confidence, as well as to ensure sufficient liquidity and efficient functioning of the financial system,” he added.
Based on latest government projections, the Philippine economy will swing from recession in 2020 to growth of 6.5 percent to 7.5 percent this year and between 8 percent and 10 percent next year.
Growth will be supported by government spending, with an approved National Budget of P4.506 on, which is 10 percent higher than last year’s and equivalent to 21.8 percent of GDP.