Fitch Ratings: PH’s outlook now positive
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Tue, 11 Feb 2020 16:20:56 +0000
Country to remain among fastest-growing economies in region, says credit rater
FITCH Ratings raised its outlook for the Philippines from stable to positive, indicating that the country’s “BBB” investment-grade credit rating is one step closer to being upgraded.
In a statement on Tuesday, the international credit ratings agency said the upward revision reflected its “expectations of [the country’s] 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.”
Fitch Ratings also projected the country’s gross domestic product (GDP) growth to accelerate to 6.4 percent and 6.5 percent in 2020 and 2021, respectively, supported by strong private consumption and rising public infrastructure investment.
Its forecast is higher than the eight-year low of 5.9 percent the Philippine economy recorded last year; and comparable to the 6.5 to 7.5-percent GDP growth the government aims to hit this year and the next.
“Overseas remittance inflows and favorable job prospects, evident from a falling unemployment rate, alongside accommodative monetary policy, should support continued private consumption demand,” Fitch Ratings said.
On current projections, the Philippines will remain among the fastest-growing economies in the Asia-Pacific in 2020 and 2021, well above the current “BBB” median, it added.
Despite this, the credit rater stressed its projections were subject to downside risks amid the 2019 novel coronavirus acute respiratory disease (2019-nCoV ARD) outbreak.
“It is still early to evaluate the effects of the outbreak, but the economy appears somewhat less vulnerable than [its] regional peers, as tourism accounts for less than 3 percent of GDP,” it said.
Preliminary estimates by the National Economic and Development Authority show that the outbreak of the coronavirus — which originated in the city of Wuhan in China’s central Hubei province last December and has claimed more than 1,000 lives worldwide, including one in the Philippines, as of Tuesday — could shave as much as 0.7 percent of the country’s economic growth if it lasts the entire year.
First emerging in the city of Wuhan in China’s central Hubei province last month, the 2019-nCoV ARD has claimed the lives of more than 900 people — including one in the Philippines — infected at more than 40,000 others and spread to more than two dozen countries as of February 10, according to the World Health Organization.
Fitch Ratings also said the Philippines was vulnerable to natural disasters that could disrupt economic activity from time to time.
Nevertheless, it believes the country has room for monetary and fiscal easing to offset the potential short-term impact on growth.
Recent reforms to strengthen institutional effectiveness, human capital and the business environment should also lead to the continued improvement in the Philippines’ structural metrics over time, it said.