Fitch affirms Philippines' investment grade


Posted at Mar 18 2015 08:13 AM | Updated as of Mar 19 2015 05:18 PM

MANILA - Fitch Ratings said it has maintained the investment grade rating of the Philippines, noting the economy's continued growth.

The credit rating agency cited the Philippine economy's consistently strong fundamentals, which it says allowed it to outperform its peers.

Fitch kept the long-term, foreign currency rating of the Philippines at BBB, with a stable outlook which means it is likey to stay the same over the short term.

"Philippines’ 5-year [average] real GDP growth was estimated to be 6.3 percent at the end of 2014, which is far above the ‘BBB’ median of 3 percent," Fitch said in its latest report on the Philippines.

Fitch expects the Philippine economy to grow by 6.3 percent this year and 6.2 percent next year, faster than growth projections for most emerging economies.

The Philippines was one of the fastest growing economies from 2010 to 2014, which was mostly attributed to the Aquino government’s reform agenda.

Bangko Sentral ng Pilipinas Governor Amando Tetangco, Jr. said Fitch's decision to maintain the Philippines' investment grade recognized the sustained strength of key fundamentals, including the country’s healthy external payments position, stable banking sector, and within-target inflation.

“The Philippine economy has reached a level of resiliency that is more comfortable than that of its peers as a result of accumulation of sufficient foreign-exchange buffer, sturdy financial system, and price stability. All of these are anchored on prudent monetary policy and effective supervision of banks and other financial institutions,” Tetangco said.

In its report, Fitch recognized the strength of the Philippines' external finances. It estimates the Philippines was a net external creditor at an amount equivalent to 15.4 percent of its GDP at the end of 2014, outperforming the median net debtor position of 4.7 percent of GDP for other countries with about the same credit ratings.

"Sustained current account surpluses since 2003 have supported the buildup in FX reserves and turned the country into a net external creditor," Fitch said.

The country's gross international reserves amounted to $79.5 billion by the end of 2014.

"Abundant domestic liquidity and generally buoyant economic conditions have supported a sustained period of robust credit growth," Fitch said.


However, Finance Secretary Cesar Purisima continues to believe the country remains underrated by Fitch and expects it to further improve.

The Philippines’ credit rating with Fitch is one notch below the rating assigned by the two other major international credit rating agencies, Moody’s Investors Service and Standard & Poor’s.

"Consistently robust growth and macroeconomic fundamentals built over the past 4 years affirm that the Philippine economic story is defined by sustainability, stability, and resiliency. Looking ahead, we expect credit ratings to further improve as the country continues to register even better fundamentals on the back of expanded fiscal space and continued governance reforms," Purisima said.