MALACAÑANG welcomed Monday the Philippines’ latest credit upgrade by ratings firm Fitch which upgraded Philippines Long-Term Foreign-Currency Issuer Default Rating to ‘BBB’ from ‘BBB-’, citing continued strong macroeconomic performance and sound policies supporting high and sustainable growth rates.
“This is yet another affirmation that the Duterte administration’s focus on law and order as well as fight against crime and corruption is (sic) the right direction,” Communications Secretary Martin Andanar said in a statement.
“This, together with the country’s strong macroeconomic performance and sound policies supporting high and sustainable growth rates gives us basis to hope that the country will continue to rise further in the ranks of Asian economies.”
Fitch, in a report released Monday, forecast real Gross Domestic Product growth of 6.8 percent for the Philippines in 2018 and 2019 and said it would maintain its place among the fastest-growing economies in the Asia-Pacific region.
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 Department of Budget and Management said in a statement.
Among the key ratings drivers cited by Fitch include the Philippine economy’s consistent growth performance evidenced by strong domestic demand and inflows of foreign direct investment, as well as the country’s robust fiscal position.
The ratings agency lauded the fiscal policies of the government that are geared to boost infrastructure spending and liability management.
The tax reform initiative, in particular, will generate revenues for the government to finance its expenditure priorities while also supporting the projected decline of the government debt-to-GDP ratio to around 34 percent, below the “BBB” median of 41 percent of GDP.
On the monetary front, Fitch also mentioned it expected inflation to remain within the 2 percent–4 percent target band of the Bangko Sentral ng Pilipinas.
The current account deficit is also expected to be manageable, driven by imports of capital goods, and being offset by remittance inflows and business process outsourcing receipts.
Furthermore, the credit agency said that foreign exchange reserve levels remain to be adequate, covering close to 8 months of current external payments. With AFP