Fitch Ratings has affirmed the Philippines' "BBB" investment grade credit rating with a "stable" outlook amid the country's steady and sustainable growth, strong macroeconomic policies, stable debt levels and what it considers a credible inflation-targeting central bank.
The Philippines has had a “BBB” credit rating from Fitch since December 2017.
An investment grade rating signals reduced credit risk, allowing countries to access funding at lower costs while a “BBB” rating, which is above the minimum investment grade, indicates a low expectation of default risk, with the country's capacity to meet financial commitments deemed adequate. As to the stable outlook, this suggests a low likelihood of a rating change over the next one to two years.
In a statement, BSP Governor Eli M. Remolona Jr. on Saturday, June 8, said he welcomed Fitch's “recognition of the central bank's efforts to keep inflation within target and highlighted the BSP's data-driven approach to setting monetary policy.”
The BSP currently has a hold stance and has kept the target reverse repurchase (RRP) rate or the policy rate at 6.5 percent since October 2023 on account of elevated inflation in 2022 and 2023.
The BSP noted that Fitch projects inflation to remain within the upper half of the BSP’s inflation target range of two percent to four percent, and that it will moderate to 3.8 percent and 3.4 percent by 2024 and 2025, respectively.
As of May 16 which was the Monetary Board’s last policy meeting, the BSP has a risk-adjusted inflation forecast of 3.8 percent for 2024 and 3.7 percent for 2025.
Meanwhile, Fitch forecasts the country’s gross domestic product (GDP) will grow by 5.8 percent this year due to investments in infrastructure and trade reforms.
The credit rating company also forecasts GDP growth of six percent over the medium term. Its forecast is modest compared to the government target of six percent to seven percent for 2024 and 6.5 percent to eight percent over the medium term.
In May, the country’s consumer price index (CPI) increased to 3.9 percent versus 3.8 percent in April, bringing the five-month average to 3.5 percent.
The GDP in the first quarter grew by 5.7 percent year-on-year which was below expectations despite that it was higher than 5.5 percent in the last quarter of 2023.
On the other hand, Fitch expects the general government debt to remain stable at 54 percent of GDP by 2025, alongside a narrowing current account deficit.