PH credit ratings unaffected by political noise

As Fitch Ratings kept the country’s investment grade credit rating, the head of the administration’s economic team yesterday said the political “noise” on the war on illegal drugs did not impact on the economy.

“Fitch Rating’s latest affirmation of its positive outlook on the Philippines only means the political chatter emanating from certain quarters has failed to dent the country’s sustained-growth narrative resulting from its strong economic performance, continued political stability and aggressive infrastructure and human capital investments under the Duterte presidency,” Finance Secretary Carlos G. Dominguez III said in a statement.

On Wednesday night, Fitch announced it had affirmed the Philippines’ credit rating at ‘BBB-’, with a positive outlook.

In a statement, the government’s Investor Relations Office noted that a positive outlook meant a bigger chance of improved credit rating in the next two years.

“Of the 114 sovereigns rated by Fitch, only six are on positive outlook, 21 are on negative outlook, while the rest are on stable outlook,” the IRO noted.

Fitch said the country’s credit rating “reflects its continued strong and consistent growth performance, a robust net external creditor position and government debt levels that are lower than the median of peers in the ‘BBB’ rating category” although it remained “constrained by relatively weak governance standards, a narrow government revenue base, and levels of per capita income and human development.”

Citing the Philippines’ “strong” economic growth as a rating strength, Fitch said it expected the gross domestic product (GDP) to grow 6.8 percent this year and 6.7 percent next year following last year’s 6.8-percent GDP growth.

The government aims for a 6.5- to 7.5-percent GDP growth this year and 7 to 8 percent next year until 2022.

“The Philippines’ average real GDP growth for the five years to 2016 was 6.6 percent, well above the ‘BBB’ median of 3.2 percent,” Fitch noted.

The debt watcher said that since President Duterte took office, “macroeconomic performance had remained strong despite the increase in incidents of violence associated with the administration’s campaign against the illegal drug trade while domestic political stability had been maintained.”

“Fitch will continue to monitor the impact of the President’s campaign against drugs on economic performance, financing flexibility and capital flows. In terms of the broader policy agenda, the new administration has adopted a 10-point socioeconomic plan, which signals broad continuity of policies under the previous administration,” it said, referring to the Duterte government’s development blueprint aimed at slashing the poverty incidence to 14 percent by 2022.

“To maintain broad policy continuity, the Duterte administration will continue to pursue its 10-point socioeconomic agenda on high—and inclusive—growth, with a focus on closing the infrastructure gap, improving the ease of doing business to attract more investments, and attacking poverty by spending big on human capital formation,” Dominguez said.

“Given the positive outlook of Fitch Ratings and other institutions, the government has more reasons to highlight the country’s growth story by moving ahead on such policy reforms.” he said.