Fitch keeps PH investment-grade rating

Credit watchdog Fitch Ratings affirmed the Philippines’ sovereign credit rating at investment-grade ‘BBB-’ with a positive outlook, an indication of a possible upgrade over next year or two.

The London-based rating agency said in a report the Philippines’ strong growth momentum, robust net external creditor position and low and manageable debt levels supported the Philippines’ rating.

Finance Secretary Carlos Dominguez III said the latest positive outlook of Fitch Ratings on the Philippines was a proof the political noise has “failed to dent” the country’s growth story resulting from its strong macroeconomic performance and continued political stability amid the Duterte administration’s  reform agenda and tough war on illicit drugs and other crimes.

‘Fitch Rating’s latest affirmation of its positive outlook on the Philippines only means that the political chatter emanating from certain quarters has failed to dent the country’s sustained-growth narrative resulting from its strong economic performance, continued political stability and aggressive infrastructure and human capital investments under the Duterte presidency,” Dominguez said in a statement.

The Philippines grew by an average of 6.6 percent over the past five years, becoming one of the world’s fastest growing economies, it said.

Fitch said the sustained rapid growth happened alongside declining debt ratios and the implementation of a range of structural reforms, led by vital pieces of economic legislation, which helped keep the Philippines on a strong growth trajectory.

Fitch said it was expecting the Philippine economy to sustain its strong growth performance and its gross domestic product likely to increase by 6.8 percent in 2017 and 6.7 percent in 2018.  

Domestic demand supported by private consumption and investment spending continued to fuel economic growth, it said. The sustained strong performance of the business process outsourcing sector also remained supportive of domestic demand, according to Fitch. 

Capital formation grew a hefty 20.8 percent in 2016. Meanwhile, BPO revenues are projected to reach $24.5 billion this year from the estimated $22.9 billion in revenues in 2016.

Fitch highlighted the country’s strong external position with sustained current account surpluses, high levels of international reserves and low and declining external debt.  “The Philippines’ current account has been in surplus since 2003 which has led to a steady increase in its foreign exchange reserves and supports its net external creditor position,” Fitch said.

The current account surplus stood at $601 million in 2016 or 0.2 percent of GDP, supported by a sustained increase in overseas Filipinos remittances, as well as business process outsourcing revenues and tourism receipts. Gross international reserves reached $81.4 billion as of end-February 2017, enough to cover nine months’ worth of imports.  Remittances, which rose 5 percent in 2016 to $26.9 billion, is expected to hit $27.7 billion this year.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said Fitch’s latest assessment was driven mainly by solid performance of the Philippine economy across various metrics - robust and broad-based economic growth amid a stable inflation environment, strong external payments position, and sound and stable banking system.  

“These macroeconomic conditions did not happen by chance,” Tetangco said. “The country’s economic gains have been built from deeply rooted structural and sound policy reforms implemented over the years. Economic gains are the results of years of disciplined macroeconomic policy making.”