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Philippines
Thursday, March 28, 2024

Fitch upgrades PH credit rating

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Global debt watcher Fitch Ratings Inc. upgraded the Philippines’ sovereign credit rating to “BBB” from the minimum investment grade of “BBB-,” providing an endorsement of President Rodrigo Duterte’s economic plans, which include a tax reform aimed at strengthening the fiscal outlook. 

“The Duterte administration welcomes the good news of the credit upgrade by Fitch Ratings,” said Budget Secretary Benjamin Diokno. “The upgrade supports the growing consensus that the Philippines is one of the fastest growing countries not only in the fast-growing Asia Pacific region but also in the entire world.”

Credit ratings assess the default risk of a prospective debtor, providing guidance to investors, corporations and governments worldwide. “The improved credit rating of the Philippines will therefore enhance the government’s access to financing and potentially present more favorable terms and conditions for future loans,” the Budget Department said.

The upgrade puts the Philippines on par with Italy and ahead of Indonesia.  It came more than four years since Fitch gave the Philippines its very first investment grade in March 2013. The upgrade also put Fitch Ratings’ score at par with those of Moody’s Investors Service and S&P Global Ratings.

The new rating is assigned a “stable” outlook, which means there are no pressing factors that could trigger an adjustment within the near term.

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Fitch said the “Philippines’ strong and consistent  macroeconomic performance has continued and underpinned by sound policies that are supporting high and sustainable growth rates.”

Despite the controversy over Duterte’s bloody anti-drug war, Fitch said there’s no evidence it’s undermined investor confidence. The economy is set to remain one of the fastest expanding in Asia with growth of 6.8 percent next year and in 2019, the ratings company said.

Finance Secretary Carlos Dominguez III said the government was pleased that Fitch was finally convinced that the Philippine economy was much stronger now and more resilient than in 2013, when it granted the Philippines its first investment grade rating of BBB.

“Our macroeconomic fundamentals are on par with, if not better than, those of higher-rated sovereigns and continue to improve. Our economic growth in recent years has been one of the fastest in the region and among our rating peers,” Dominguez said.

“While we are not targeting ratings per se, I am confident that with these reforms, there will be more positive rating actions in the next couple of years,” Dominguez said. With Bloomberg

Economic Planning Secretary and National Economic Development Authority Ernesto Pernia said the latest Fitch action would augur well for the economy in general.  “Great news… that will only have more positive effect on the economy,” Pernia said.

Fitch also recognized the prudence of the appointment of Nestor Espenilla Jr. as the new head of Bangko Sentral ng Pilipinas.  Espenilla, who assumed the BSP’s top post in July, has been a career central banker for over 30 years now.

“The recent appointment of the new central bank Governor from within the Bangko Sentral ng Pilipinas has provided continuity and supports monetary policy credibility,” Fitch said. 

Espenilla said the rating upgrade from Fitch was a recognition of the positive transformation that was taking place in the Philippines.  

“The productive capacity of the economy is expanding. This is making possible higher GDP growth that is sustainable. Inflation is low and stable while the balance of payments remains very manageable. The domestic financial system’s resources and profitability have continued to increase, governance standards and risk management systems have been enhanced, and significant inroads toward financial inclusion is being achieved,” Espenilla said said. 

“We expect this virtuous cycle to continue. BSP will remain committed to our crucial mandate of price and financial stability, which are necessary to further accelerate economic growth in the country.  At the same time, we will vigorously pursue game-changing financial sector reforms that support economic growth and to ensure that the benefits of a fast- growing economy are felt by more Filipinos,” Espenilla said. With Bloomberg

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