Bangko Sentral ng Pilipinas Governor Benjamin Diokno said price and financial stability will help sustain Philippine economic recovery and growth.
“Besides improvement in the COVID situation amid rising vaccination rates, we also see that rising credit activities and a favorable inflation outlook will support growth moving forward.”
“The Philippine banking system has kept the impact of the crisis manageable. Philippine banks continue to serve the rising demand for credit. We also expect inflation to stay well within the target range of 2.0 to 4.0 percent this year up to 2024, which will provide an enabling environment for consumption and investments,” Diokno added.
Fitch Ratings on Thursday affirmed the Philippines’ credit rating of “BBB,” which is a notch above minimum investment grade, citing economic gains that demonstrate sustained recovery from the COVID-19 crisis.
The Philippines has maintained the same rating from Fitch (as with the ratings of other debt watchers) throughout the pandemic, despite a wave of rating downgrades for many other countries during the same period.
“[Philippine economic recovery] should be supported by a pick-up in vaccination rates (92 percent of 54 million target individuals had been fully vaccinated as of December 2021), falling Covid-19 infection numbers, normalised economic activity – particularly in services – after tight containment measures in 2020 and part of 2021. The fiscal and monetary policy response, strong infrastructure spending and resilient remittances and exports is also boosting the recovery.”
Fitch’s rating affirmation followed the Philippine government’s announcement in January 2022 that the economy expanded by 7.7 percent in Q4 2021 on the back of renewed growth in consumption and investments. The strong growth in the last quarter of 2021 brought full-year GDP growth to 5.6 percent, exceeding the target range of 5.0 to 5.5 percent and reversing the recession in 2020.
At the same time, however, Fitch kept the outlook on the BBB rating at “negative”.
Risk factors cited by Fitch included the fiscal cost of the government’s COVID-19 response, the challenges arising from the unwinding of stimulus measures, and post-election uncertainty, particularly on the continuity of fiscal and economic policies.