Recto: Fitch’s affirmation of Philippines economy a big win for Filipinos

CEBU, Philippines — Finance Secretary Ralph G. Recto has welcomed Fitch Ratings’ recent affirmation of the Philippines’ BBB credit rating with stable outlook, which signals strong growth momentum in the medium term and a big win for ordinary Filipinos as it translates to more accessible financing for the government’s development programs.

“This affirmation is highly encouraging as it shows a strong vote of confidence in our ability to grow the Philippine economy in a higher path over the medium term,” he said.

“As I have said before, any rating affirmation or upgrade is a major win for all Filipinos as this means that the Philippines can have more access to cheaper financing from global capital markets. A better credit rating will help us create more jobs and reduce the poverty rate,” he added.

The Philippines’ high credit rating sends a signal of confidence to investors and creditors, resulting in lower interest rates and better returns for Philippine bonds.

It also attracts more foreign investments into the country, which will create better employment opportunities for Filipinos.

Fitch’s recent reaffirmation of the Philippines’ credit rating has allowed the country to maintain its high investment-grade status across all major regional and international debt rating agencies.

In its report dated June 7, 2024, Fitch said the BBB rating and stable outlook reflect the Philippines’ strong medium-term growth.

The credit rating agency expects the Philippine economy to expand by 5.8% in 2024, with a GDP growth of above 6% over the medium term. This is considerably stronger than the ‘BBB’ median of 3%.

According to Fitch, the strong growth momentum will be supported by large investments in infrastructure and reforms to foster trade and investment, including public-private partnerships (PPPs).

It recognized that the Marcos, Jr. administration has continued to advance structural economic reforms with the overarching goal of catalyzing private investments.

Along with the economic liberalization laws passed in 2022, the agency emphasized that the issuance of the implementing rules and regulations for the new PPP law in March 2024 is expected to have a positive impact on economic growth in the medium term.

Meanwhile, Fitch highlighted that the country’s debt remains stable, expecting a gradual reduction in the country’s general government (GG) debt-to-GDP at 54% by 2025.

The country’s strong nominal GDP growth and narrowing fiscal deficits contribute to its forecast of a downward path for the GG debt-to-GDP ratio over the medium term.

It likewise said that the government’s fiscal deficit-to-GDP ratio targets of 5.6% in 2024 and 5.2% in 2025 are broadly in line with Fitch’s forecasts and highlighted that the expected fiscal consolidation rests on improved tax collection and spending efficiencies. (DOF.GOV.PH) — (FREEMAN)