By Chino S. Leyco
Debt-watcher Fitch Ratings announced that it upgraded the Philippines’ long-term foreign-currency issuer default rating (IDR) to “BBB” with a stable outlook.
In a statement, Fitch said the Philippines’ “strong and consistent macroeconomic performance has continued, underpinned by sound policies that are supporting high and sustainable growth rates.”
The rating agency added investor sentiment has also remained strong, which is evident from solid domestic demand and inflows of foreign direct investment.
Likewise, Fitch noted that there is “no evidence so far” that incidents of violence associated with the Duterte administration’s campaign against the illegal drug trade have undermined investor confidence.
“Over the medium term, we expect higher infrastructure spending under the government’s public investment programme to support continued robust growth,” Fitch said.
The rating agency, meanwhile, is forecasting the country’s economy, as measured by its gross domestic product (GDP), to grow 6.8 percent next year and in 2019, which would maintain the nations’ place among the fastest-growing economies in the Asia-Pacific region.
Finance Secretary Carlos G. Dominguez III welcomed Fitch Ratings’ latest action.
“We are pleased that Fitch is finally convinced that the Philippine economy now is much stronger and more resilient than in 2013, when they granted the Philippines its first investment grade credit rating of BBB-,” Dominguez told reporters in a mobile text message.
The Finance chief said the Philippines’ macroeconomic fundamentals are on par with, if not better than, those of higher-rated sovereigns and continue to improve.
“Our economic growth in recent years has been one of the fastest in the region and among our rating peers,” Dominguez said, noting the government’s fiscal position is also much stronger now on account of administrative measures.
“We are implementing to improve revenue collection efficiency of the BIR [Bureau of Internal Revenue] and BOC [Bureau of Customs] and the budget and expenditure reforms being pursued by DBM [Department of Budget and Management],” he added.
Likewise, Dominguez said the Philippines’ growth prospects are also brighter compared with its neighbors and peers.
“The Duterte Administration is fast-tracking crucial structural reforms—including the Comprehensive Tax Reform Program, the bold infrastructure development agenda, and liberalization of the investment regime, among others,” Dominguez said.
“All these will help accelerate economic expansion, spread development, and increase income in lagging regions. While we are not targeting ratings per se, I am confident that with these reforms, there will be more positive rating actions in the next couple of years,” he concluded.