CREDIT rating agency Standard & Poors Global late Friday maintained its BBB+ long-term credit rating with a stable outlook on the Philippines “in recognition of the country’s sound macroeconomic fundamentals going into the COVID-19 pandemic and its perceived ability to bounce back from the crisis.”
BBB+ is a notch away from the minimum score within the “A” territory.
Benjamin Diokno, Bangko Sentral ng Pilipinas governor, said the action is “a big vote of confidence coming from the rating agency on the post-pandemic economic recovery of the Philippines.”
“The Philippines is defying the global trend of rating downgrades and negative rating outlook as an aftermath of the health crisis and the subsequent containment measures of many governments,” Diokno noted.
“Thanks to critical institutional reforms and sound policy management, we are in the advantageous position of having monetary space to carry out further easing, if necessary,” Diokno said.
“While being mindful of our price and financial stability mandates, we are thinking outside the box to enact policies that ultimately help safeguard the lives and livelihoods of our people. Such is our solemn responsibility in this once-in-a-lifetime crisis, and I am confident that our approach will demonstrate the resilience of our country,” he added.
Diokno explained that the Philippines is badly hit as well, with the country’s gross domestic product (GDP) expected to contract this year after posting 84 consecutive quarters of growth.
He noted that what goes well for the Philippines is its sound fundamentals going into the crisis that allow it to implement massive relief response without fear of a debt blowout.
S&P said the affirmation of the Philippines’ credit rating reflects its “expectations that the economy will continue to achieve above-average growth over the medium term, which will drive constructive development outcomes and underpin broader credit metrics.”
The debt watcher forecasts the economy to contract by 0.2 percent this year and then strongly bounce back with a growth of 9.0 percent next year.
S&P recognized favorable macroeconomic fundamentals of the Philippines going into the crisis, including improving per-capita income, low inflation, strong balance sheets of the corporate sector, stable financial system, and declining unemployment rate.
“The Philippine economy is among the fastest growing in the world on a 10-year weighted-average, per capita basis — a reflection of its supportive policy dynamics and improving investment climate. The country has a relatively diversified economy with an increasingly strong track record of high and stable growth,” S&P said.
It projects real GDP per capita growth to average approximately 4.2 percent per year over 2020-2023.
The debt watcher likewise cited the reforms in the fiscal front implemented under the Duterte administration, which helped boost the government’s ability to respond to the crisis.
“The government has enacted effective fiscal policies in recent years, marked by improvements to the quality of expenditures, manageable fiscal deficits, and low levels of general government indebtedness,” it said.
S&P said the country’s external position is a key strength, marked in part by rising foreign exchange reserves and comfortable external debt metrics.
S&P’s latest rating decision on the Philippines came following the move of Fitch Ratings earlier this month to affirm its rating of “BBB” for the Philippines and to adjust the outlook on the said rating from “positive” to “stable.”
Carlos Dominguez, finance secretary, said the affirmation “is an unequivocal recognition by S&P of the resilience of the Philippine economy to regain its high-growth trajectory in the new normal.”
“We are confident that our government’s four-pillar strategy to deal with the pandemic will see us through this global health emergency as we remain focused on saving lives and protecting communities while gradually lifting mobility restrictions to restart the economy and get people back to work,” Dominguez said.
Karl Chua, acting secretary of the National Economic and Development Authority, highlighted the government’s economic recovery program, which entails helping small businesses to bounce back, such as through ample access to credit, supporting workers and their families through targeted wage subsidies, and cash-for-work programs.
“No country has been spared from the economic effects of this global pandemic, but our strong economic fundamentals and inclusive recovery measures will power our return to growth,” Chua said.
“Thanks to our ample buffers and fiscal space, we can jumpstart domestic demand by investing more in healthcare, infrastructure, and the entire food value chain,” Chua added.
