Category : Press Release
Date : May 31, 2019
Agency : Investor Relations Office
Title : Fitch affirms Philippines’ ‘BBB’ rating, ‘stable’ outlook | Debt watcher cites healthy growth, manageable inflation environment
Article : Investor Relations Office
Press Release
31 May 2019



Fitch Ratings has kept the Philippines’ credit rating at “BBB” with a “stable” outlook, citing sustainability of the economy’s robust growth, while recognizing successful efforts to bring inflation back to target.

The rating is a notch above the minimum investment grade, and the stable outlook indicates the absence of factors that can change the rating within the short term.

In a report released on 30 May 2019, the international debt watcher said it expects the Philippine economy to grow by 6.1 percent this year, about the same as the 6.2 percent last year. It said strong domestic demand, both from public and private sectors, will allow the economy to hurdle external headwinds, such as a slowing Chinese economy and trade tensions between China and the United States.

According to Fitch, “Growth will remain supported by strong private consumption and the government’s public investment program, which targets an increase in infrastructure spending to about 7 percent of GDP by 2022 from 4.5 percent in 2017.”

At the same time, the debt watcher said that after being temporarily elevated last year due mostly to supply factors, including rising global oil prices, average inflation this year is expected to decelerate, citing the 3.0 percent recorded in April, which was well within the official full-year target of 2.0 to 4.0 percent.

Fitch took note of decisive monetary and non-monetary measures that the government implemented to bring back inflation to within-target range.

“Overheating risks have subsided following the cumulative rate hikes of 175 basis points last year by the Bangko Sentral ng Pilipinas,” Fitch said. It added that, “Inflation fell… facilitated by the passage of the rice tariffication law that lifts import restrictions, and credit growth has slowed significantly.”


Responding to the rating-affirmation by Fitch Finance Secretary Carlos Dominguez III said, “We are glad Fitch has taken note of the Philippine economy’s resilience to both external and domestic headwinds. In part, the strength of the economy is credited to the decisive leadership of President Duterte who has demonstrated strong political will in implementing unpopular game-changing reforms to sustain the growth momentum and achieve financial inclusion for all.”


“The first package of the comprehensive tax reform program and the liberalization of the rice sector, among a long list of reforms implemented recently, are vital structural changes that will keep the economy on its high growth path, create more jobs, and improve the living standards of Filipinos,” Dominguez said.


He said that despite external and internal financial threats, economic growth is expected to gain more traction now as the government starts implementing a catch-up spending program on infrastructure and human capital development to reverse the lower-than-expected expansion in the year’s first quarter, brought about in large part by the congressional delay in the approval of the 2019 national budget.

For his part, BSP Governor Benjamin E. Diokno said, “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.”

“The much improved inflation outlook, including better anchored inflation expectations, has allowed the BSP to cut policy rates by 25 bps and to cut the reserve requirement ratio in May. Guided by its price stability mandate, the BSP will continue to adhere to the conduct of sound monetary policy, making sure it is properly calibrated to provide an environment that enables sustainable economic growth,” Diokno added.

Meantime, Fitch likewise cited other factors for its decision to affirm the Philippines’ “BBB” rating with a “stable” outlook, including stable banking sector, adequate foreign exchange reserves supported by sustained inflows in the form of remittances and business process outsourcing (BPO) revenues, and manageable debt situation.


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