Fitch affirms PH investment grade score under Duterte


Posted at Mar 29 2017 09:17 PM

MANILA - Fitch Ratings on Wednesday affirmed its investment grade rating with a positive outlook on the Philippines, citing sustained economic growth momentum under President Rodrigo Duterte.

Fitch also noted the country's robust external creditor position, and low debt levels compared to similarly rated economies.

However, "weak governance standards," a narrow revenue base and per capita income and human development that are below the median for economies with similar ratings constrain the Philippines' score, Fitch said.

An investment grade ratings means the Philippines can borrow abroad at lower cost and gives the it a larger market for debt offerings. The country is similarly rated at investment grade by S&P and Moody's.

"Macroeconomic performance has remained strong despite the increase in incidents of violence associated with the administration's campaign against the illegal drug trade while domestic political stability has been maintained," the debt-watcher said in a statement.

"Fitch will continue to monitor the impact of the president's campaign against drugs on economic performance, financing flexibility and capital flows," it said.

Duterte was elected by one of the largest margins in history last year with the promise to dismantle illegal drugs rings and improve peace and order.

A positive outlook means an upgrade could happen. Fitch said the rating might be raised if strong growth that could withstand external developments, including growing protectionism, continues.

Fitch said it would also monitor efforts to broaden the tax base.

A "deterioration" in governance standards and political instability could cause a downgrade of the positive outlook to stable, Fitch said.

Gross Domestic Product grew 6.8 percent in 2016 and economic managers are expecting growth of betwee 6.5 to 7.5 percent in 2017. Fitch forecast growth of 6.8 percent this year and 6.7 percent next year.