Philippines inches closer to rating upgrade after Fitch raises outlook to 'positive'
MANILA, Philippines — Global debt watcher Fitch Ratings on Tuesday raised its outlook on the Philippine economy, opening up the possibility of a credit rating upgrade for the country.
In a statement, Fitch said it revised its outlook on the Philippines from “stable” to “positive” and affirmed the Southeast Asian country’s credit rating at “BBB” — still a notch above minimum investment grade.
“The outlook revision reflects Fitch's expectations of continued adherence to a sound macroeconomic policy framework that will support high growth rates with moderate inflation, progress on fiscal reforms that should keep government debt within manageable levels and continued resilience in its external finances,” the debt watcher said.
Credit ratings reflect the ability of a country to manage and pay back its debt and can influence a nation’s ability to attract foreign investment. A higher rating can lower the cost of borrowing in foreign currencies for the Philippine government and private companies in the country.
Outlooks indicate the direction a rating is likely to move over a one- to two-year period. A positive outlook means that an economy’s rating could stay at its present level or potentially be upgraded.
Fitch said it expects the Philippine economy to grow 6.4% this year before accelerating to 6.5% in 2021, adding the country would remain among the fastest-growing economies in the Asia-Pacific region in two years.
Fitch also said that while the novel coronavirus outbreak poses risks to the Philippine economy, the country “appears somewhat less vulnerable” than regional peers as tourism accounts for less than 3% of its gross domestic product.
But the international debt watcher warned that a “[r]eversal of reforms or a departure from the existing policy framework that leads to macro instability” could trigger a negative rating action.
Meanwhile, continued strong growth, strengthening of governance standards and higher revenue collection could set the stage for a rating upgrade, Fitch added.
Last year, S&P upgraded the Philippines’ long-term sovereign credit rating from “BBB” to “BBB+” — or two notches above investment grade rating — with a “stable” outlook.
READ: S&P upgrades Philippines’ credit rating
Earlier this month, Tokyo-based Rating and Investment Information Inc. raised its credit rating for the Philippines to “BBB+” from “BBB”.
The Duterte administration is targeting to attain the much-coveted “A” credit rating by 2022.
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