Philippines nears first 'A' credit rating after Fitch upgrades outlook

ABS-CBN News

Posted at Feb 11 2020 05:54 PM | Updated as of Feb 11 2020 08:42 PM

MANILA - Debt watcher Fitch Ratings on Tuesday said it upgraded its outlook on the Philippines to positive from stable while affirming its BBB rating in the Southeast Asian nation.

The positive outlook means that the Philippines is a step closer to the coveted 'A' rating which would further open up credit for the country by lowering interest rates from commercial creditors.

S&P rates the Philippines as BBB+ while Moody's has given the country a Baa2 with a stable outlook. These are all investment-grade ratings which means the country is capable of meeting its financial commitments.

Fitch said the outlook revision reflects its "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."

The debt watcher said it expects the country's growth to accelerate to 6.4 percent and 6.5 percent in 2020 and 2021, respectively.

"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."

Fitch said it was still early to evaluate the effects of the outbreak, but the Philippines "appears somewhat less vulnerable than regional peers as tourism accounts for less than 3 percent of GDP."

The debt watcher added that the Philippines retains room for monetary and fiscal easing to offset the potential short-term impact on growth.

The country's fiscal situation is also expected to improve this year with the passage of higher taxes on alcohol, heated tobacco and vaping products.

"Progress on tax reforms would keep the general government deficit at about -1.2 percent of GDP until 2020, according to our projections, helping to contain the Philippines' government debt levels even as the administration's infrastructure program continues."

Fitch said the government's recent decision to review certain contracts with private companies may create some uncertainty.

But Fitch said it also believes the overall business environment will be unaffected by this, and foreign direct investment flows remain strong for the time being.