Fitch keeps Philippines' 'BBB' credit rating with 'stable' outlook


Posted at May 31 2019 04:26 PM | Updated as of May 31 2019 04:40 PM

MANILA - Fitch Ratings on Friday said it kept its "BBB" with a "stable" outlook score for the Philippines, citing robust economic growth and its successful drive to curb inflation. 

A BBB rating is a notch above the minimum investment grade, while a stable outlook signifies absence of factors that could affect the rating in the near-term.

"The ratings balance the Philippines' prospects of strong sustainable growth and high levels of foreign-exchange reserves against relatively low per-capita income, governance indicators, and government revenue," Fitch Ratings said. 

Fitch said overheating risks have subsided following a cumulative 175 basis point hike in the benchmark interest rate last year to curb inflation. Inflation slowed to 3 percent in April, within the government's 2 to 4 percent target range. 

"As recognized by Fitch, following the implementation of decisive actions by national government to address supply-side issues, including decisive policy rate hikes by the BSP last year to anchor inflation expectations and contain any second-round effects, inflation has reverted to within-target level this year," BSP governor Benjamin Diokno said.

The "much improved" inflation outlook paved the way for a 25 basis point benchmark policy rate cut and the 200 basis points cut in the reserve requirement for banks this year, Diokno said.

Fitch said the economy could recover and expand to over 6 percent in the medium term after budget delays dragged first quarter growth to 5.6 percent.

"We expect the economy to expand at more than 6% per year over the medium term...Growth will remain supported by strong private consumption and the government's public-investment program," Fitch said. 

Finance Secretary Carlos Dominguez said the strong economy is credited to the "decisive" leadership of President Rodrigo Duterte for implementing game-changing reforms to sustain growth momentum.

“We are glad Fitch has taken note of the Philippine economy’s resilience to both external and domestic headwinds," he said. 

The economy is slated "to gain more traction" now that the government has started implementing its "catch-up" spending plan, Dominguez said.