Credit rating agency Fitch Ratings yesterday revised upward its rating outlook on the Philippines to “positive” from stable and affirmed its Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB’.
According to Fitch, the revised outlook reflects their expectations of “continued adherence to a sound macroeconomic policy framework that will support high growth rates with moderate inflation, progress on fiscal reforms that should keep government debt within manageable levels and continued resilience in its external finances.”
Outlooks indicate the direction a rating is likely to move over a one- to two-year period. A positive outlook indicates an upward trend on the rating scale.
In the country’s case, the positive outlook suggests a possible upgrade to BBB+ which is just a notch below the ‘A’ rating or ‘high credit quality.’
Sagarika Chandra, Fitch associate director and primary rating analyst, said Fitch expects growth to accelerate to 6.4 percent and 6.5 percent in 2020 and 2021, respectively, after slowing to 5.9 percent in 2019, supported by strong private consumption and rising public infrastructure investment.
“Overseas remittance inflows and favorable job prospects, evident from a falling unemployment rate, alongside accommodative monetary policy should support continued private consumption demand. On current projections, the Philippines will remain among the fastest-growing economies in the Asia-Pacific region in 2020-2021, well above the current ‘BBB’ median,” Chandra said.
“Our macroeconomic projections are subject to downside risks, however, from the evolving coronavirus outbreak. Moreover, the Philippines is vulnerable to natural disasters that can disrupt economic activity from time to time. It is still early to evaluate the effects of the outbreak, but the economy appears somewhat less vulnerable than regional peers as tourism accounts for less than 3 percent of GDP. In addition, the Philippines retains room in our view for monetary and fiscal easing to offset the potential short-term impact on growth,” the analyst added.
Last week, Japan-based Rating and Investment Information Inc. (R&I) upgraded the Philippines’ credit rating by a notch, from BBB to BBB+.
Favorable assessment from Japanese credit rating agencies like R&I has become more important for the Philippines in recent years, given the government’s successive issuances of Samurai bonds in the Japanese market as part of the strategy to diversify sources of financing. (J. Calapati)
Besides R&I, other credit rating firms that assign a BBB+ rating to the Philippines are Japan Credit Rating Agency (JCR) and Standard & Poor’s Global. Moody’s Investors Service assigns a rating of Baa2 which is equivalent to BBB.
