MANILA - Fitch Ratings announced on Monday that it has affirmed the Philippines’ 'BBB' investment-grade credit rating and revised its outlook to stable from negative.
The credit ratings agency said the stable outlook reflects its “improved confidence that the Philippines is returning to strong medium-term growth after the Covid-19 pandemic.”
This, Fitch said, supports sustained reductions in government debt/GDP, after substantial increases in recent years.
A 'BBB' rating means a low risk of default and adequate capacity to pay, although some unfavorable economic conditions could constrain this capacity.
The Philippines’ debt-to-GDP ratio hit a record P13.86 trillion in March this year, but the government has also reported that the debt-to-GDP ratio had declined from around 63.5 percent last year to 60.9 percent by the end of 2022.
“The revision also reflects our assessment that the Philippines' economic policy framework remains sound and in line with 'BBB' peers, despite its low scores on World Bank Governance indicators,” Fitch Ratings said.
Real GDP is also seen to grow above 6 percent over the medium term, which Fitch noted is “considerably stronger than the 'BBB' median of 3 percent.”
The Philippine economy expanded 6.4 percent in the first quarter of 2023, the slowest following 7 quarters of above 7 percent growth, amid “normalization” following the rebound from the pandemic-induced recession.
The government is expecting the economy to grow around 6 to 7 percent in 2023.
Fitch said it also expects the fiscal deficit to narrow to 2.8 percent of GDP in 2023 and 2024, from an estimated 3.3 percent of GDP in 2022 and 4.6 percent of GDP in 2021.
Inflation meanwhile is seen to ease to an average of about 4 percent by 2024.