Fitch upgrades PH rating

Debt watcher Fitch Ratings on Monday upgraded the Philippines’ credit rating to ‘BBB’ from ‘BBB-’ with a “stable” outlook, noting that the Duterte administration’s bloody war on illegal drugs has yet to deter investors.

With the upgrade, Fitch’s rating on the Philippines, kept the same for four years, is now at the same level as those of Moody’s Investors Service and Standard & Poor’s at one notch above minimum investment grade. The “stable” outlook meant an adjustment is unlikely in the near term.

“Strong and consistent macroeconomic performance has continued, underpinned by sound policies that are supporting high and sustainable growth rates. Investor sentiment has also remained strong, which is evident from solid domestic demand and inflows of foreign direct investment,” Fitch said.

Fitch was also bullish about the administration’s ambitious “Build, Build, Build” infrastructure program, which it said would support continued robust growth.

“Fitch forecasts real GDP [gross domestic product] growth of 6.8 percent in 2018 and 2019, which would maintain the Philippines’ place among the fastest-growing economies in the Asia-Pacific region,” it said.

“The recent appointment of a new central bank governor from within the Bangko Sentral ng Pilipinas has provided continuity and supports monetary policy credibility. We expect inflation to remain within the BSP’s target range of 2-4 percent. A continuation of exchange rate flexibility should help preserve the recent buildup of foreign exchange reserves,” according to Fitch.

As for the comprehensive tax reform program, Fitch said it expected the measure to improve the country’s fiscal profile.

Improved ratings would allow the government to demand lower rates when it borrows, which could translate to lower interest rates for consumers and businesses borrowing from banks using government-issued debt paper as benchmarks for their loans.

“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-,’” Finance Secretary Carlos G. Dominguez III said.

BSP Governor Nestor A. Espenilla Jr. said the rating upgrade from Fitch was a recognition of the positive transformation taking place in the Philippines where productive capacity of the economy is expanding, inflation is low and stable while the balance of payments remains manageable.