Global credit watcher Fitch Ratings affirmed the Philippines’ “BBB” investment-grade rating as the country showed sustained macroeconomic fundamentals and resilience amid external headwinds.
The BBB rating is a notch above the minimum investment grade. Fitch also kept the outlook on the rating at “stable.”
An investment-grade rating indicates lower credit risk, thus allowing a country to access funding at lower costs from development partners and international capital markets. A “BBB” rating indicates that expectations of default risk are currently low and that the country’s current capacity for payment of financial commitments is considered adequate.
Meanwhile, an assignment of a “stable” outlook means Fitch is not likely to change its rating over a one- to two-year period.
The Philippines has maintained a “BBB” credit rating from Fitch since December 2017. The agency revised its outlook on the rating from negative to stable on May 22, 2023.
Fitch said its latest decision recognized the country’s strong medium-term growth prospects, gradually declining debt, macroeconomic stability and sound economic policies.
Fitch said it views the Bangko Sentral ng Pilipinas’ inflation-targeting framework and exchange rate regime as credible. Since May 2022, the BSP’s Monetary Board has increased the policy rate by a total of 450 basis points to 6.5 percent, to bring inflation back to within the government’s target range of 2.0 to 4.0 percent.
The Philippine Statistics Authority (PSA) said year-on-year headline inflation slowed to 4.9 percent in October from 6.1 percent in September. Fitch expects inflation to moderate to 3.5 percent by 2025.
BSP Governor Eli Remolona, Jr. said the Fitch’s move was a recognition of the work being done by the central bank to bring inflation back to within the target range.
“The BSP will remain data dependent in managing inflation expectations in an effort to avoid the second-round effects of supply shocks,” he said.
Meanwhile, Fitch sees the Philippines’ real gross domestic product growing above 6.0 percent over the medium term, supported by large infrastructure investments as well as trade and investment reforms.
The PSA also reported that the Philippine economy rebounded strongly in the third quarter of 2023 with a growth of 5.9 percent, due mainly to the recovery in government spending.
Fitch said it expects the country’s general government debt to decline to 54.0 percent of GDP in 2025 after peaking slightly above this level from 2023 to 2024.