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Manila Bulletin devider Business devider Negative outlook won't hinder investments—DOF

Negative outlook won't hinder investments—DOF

Published Nov 3, 2022 01:58 pm

The Department of Finance (DOF) expects more investments will still enter the Philippines despite the negative outlook on the country’s credit ratings.

In a statement, Finance Secretary Benjamin E. Diokno said he remains optimistic about the country’s attractiveness to investors, saying Fitch Ratings’ recent action was still favorable despite its “negative outlook.”

Diokno pointed out that Fitch kept Manila's long-term foreign-currency issuer default rating (IDR) at ‘BBB’, which is a notch above minimum investment grade.

Moreover, Fitch’s gross domestic product (GDP) projection of 6.8 percent growth this year is within the Marcos administration’s target band of 6.5 percent to 7.5 percent, the finance chief noted.

Likewise, the 6.8 percent projection is better than the economic forecasts made by the International Monetary Fund, World Bank, and Asian Development Bank.

According to Diokno, the negative outlook by Fitch was anchored on global headwinds, particularly higher interest rates, weaker external demand, and higher commodity prices.

“I remain optimistic as we expect more investments to enter the country due to the key structural reforms we passed during the pandemic years,” Diokno said.

“Furthermore, our Medium-Term Fiscal Framework , which aims to reduce the fiscal deficit, promote fiscal sustainability, and enable robust economic growth, will help us achieve this,” he added.

In its latest report released last Oct. 27, Fitch said the 2022 growth will be driven by strong domestic demand following the reopening of the economy and normalization of activities.

Fitch also expects output growth would surpass pre-pandemic levels in the second half of this year, driven by higher private investments.

However, Fitch expects growth to slowdown next year at 5.5 percent before recovering to 6.2 percent the following year.

“Downside risks include global growth falling below Fitch's forecasts of 1.7 percent in 2023 and 2.8 percent in 2024, or the Philippine central bank raising policy rates beyond our assumption of 5.25 percent,” Fitch said.

“Further growth risks stem from potential economic scarring from the pandemic, in particular, due to learning losses,” it added.

Related Tags

Economic recovery DOF Department of Finance Finance Secretary Benjamin E. Diokno
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