Philippines 'unlikely' to see ratings downgrade: BSP's Diokno

ABS-CBN News

Posted at Aug 07 2020 09:44 AM | Updated as of Aug 07 2020 10:27 AM

Bangko Sentral ng Pilipinas Governor Benjamin Diokno answers questions during the unveiling of the 20-piso coin at the Executive Business Center at the Bangko Sentral ng Pilipinas, (BSP) in Manila on December 17, 2019. Jonathan Cellona, ABS-CBN News/File

MANILA - The Philippines is unlikely to suffer from an investment rating downgrade despite the worse than expected 16.5 percent contraction in the second quarter economic growth due to the coronavirus pandemic, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Friday

From January to June, ratings agencies Fitch Ratings, Moody's Investor Service and S&P Global Ratings downgraded 82 sovereigns, while some 104 nations' outlooks were revised to negative, Diokno said in a statement.

The ratings agencies, meanwhile, have "affirmed" the Philippines' investment grade ratings and outlook, the central bank chief said.

"Highly unlikely...The sharp fall in Q2 GDP does not pose a danger to the Philippines strong macroeconomic fundamentals," Diokno said.

Its low debt-to-GDP (gross domestic product) ratio, benign inflation, strong peso, hefty gross international reserves, well-capitalized banking system will help keep the country's ratings, he said.

Having an investment grade rating enables the country to take out loans for longer periods and lower interest rates, among others.

The second quarter GDP dropped 16.5. percent, reflecting the full impact of coronavirus lockdowns, officially bringing the country into recession.

First quarter GP growth was revised to -0.7 from -0.2 percent.

The Q2 plunge is just "temporary," economic managers said, adding that they still expect a strong 2021 recovery with a 6.5 percent to 7.5 percent growth.

The economy could shrink to as much as 5.5 percent this year, the Development Budget Coordination Committee said Thursday, revising its earlier estimate of a contraction of up to 3.4 percent.