MANILA - The growth in lending activities could further boost economic growth, the central bank said Friday after Fitch Ratings affirmed the Philippines' investment-grade BBB rating.
On Thursday, debt watcher Fitch affirmed its "BBB" rating for the Philippines, which is notch above minimum investment grade. A BBB rating provides the country access to more credit with lower interests.
This, after the economy grew faster than anticipated at 5.6 percent in 2021.
Fitch said it expects the economy to grow 6.9 percent in 2022 and 7 percent next year supported by the pick-up in vaccination rates, falling COVID-19 infections, normalizing economic activities, infrastructure spending, remittances and export, among others.
The debt watcher, however, kept its outlook on the country "negative" due to the uncertainty in medium-term growth, the ongoing health crisis, and the country's response to mitigating rising debt.
In a statement, the country's economic managers cited growth drivers and other factors backing sustained growth despite the ongoing pandemic.
“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," Bangko Sentral ng Pilipinas Governor Benjamin Diokno said.
“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 to 4 percent this year up to 2024, which will provide an enabling environment for consumption and investments,” Diokno added.
Bank lending rose 4.6 percent in December, partly driven by a more optimistic economic outlook and the easing of restrictions at the end of 2021. [ROSE https://news.abs-cbn.com/business/01/31/22/bank-lending-expands-46-percent-in-december]
Inflation also eased in January to 3 percent using 2018 as the base year, settling within the government target range. Decelerating inflation gave the BSP room to keep the benchmark interest rate at its record low of 2 percent.
Fitch also noted that the country's debt-to-GDP ratio remains below that of its peer median.
Finance Secretary Carlo Dominguez said the country's general government debt is estimated to reach 54 percent in 2021.
"The general government’s debt remains manageable, and we expect this to remain at around the same level this year and the next," Dominguez said.
The return to "rapid economic growth" will be fueled by "game-changing" economic reforms such as the Foreign Investments Act (FIA), Retail Trade Liberalization Act (RTLA) and Public Service Act (PSA) which can further open the country to foreign investment, Dominguez said.
Economic reforms, which are seen to boost growth beyond 2022, could steer the country to its goal of becoming an upper-middle-income economy this year, Dominguez said.
Daily COVID-19 cases have dropped drastically with the health department reporting just over 2,000 cases on Feb. 17 from a record high of above 39,000 the previous month.