By Joann Santiago
MANILA, March 18 (PNA) — Philippine economic officials on Wednesday hailed Fitch Ratings affirmation of the country’s credit ratings.
This after the debt watcher affirmed the country’s ‘BBB-‘ long-term foreign currency issuer default rating (IDR) and ‘BBB’ local currency IDR. The outlook for both ratings is ‘Stable’.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said Fitch’s decision noted the continued improvement of the country’s fundamentals.
“The Philippine economy has reached a level of resiliency that is more comfortable than that of its peers as a result of accumulation of sufficient foreign-exchange buffer, sturdy financial system, and price stability. All of these are anchored on prudent monetary policy and effective supervision of banks and other financial institutions,” he said.
Fitch said its decision to affirm the country’s credit ratings reflects “strong macroeconomic performance.”
It noted that inflows from Filipinos overseas as well as the business process outsourcing (BPO) sectors continue to boost domestic growth, thus, it forecasts a 6.3 percent output, as measured by gross domestic product (GDP), for the domestic economy this year and 6.2 percent for 2016.
The government’s growth target for this and next year is an range between seven to eight percent.
Last year, the domestic economy churned in a 6.1 percent growth, lower than the 6.5-7.5 percent target due to the slowdown in the first three quarters of the year.
In the last quarter of 2014, the domestic economy rebounded after posting a 6.9 percent growth buoyed by the construction activities and the agriculture sector. This growth is better than quarter-ago’s 5.3 percent and the 6.3 percent in the third quarter of 2013.
”The Philippines’ five-year real GDP growth was estimated to be 6.3 percent at the end of 2014, which is far above the ‘BBB’ median of 3.0 percent,’ it said.
The debt watcher also said that the country’s external finances is “a key credit strength” citing the economy’s current account surplus, which it has been enjoying since 2003.
The current account surplus enabled the country to build up its foreign exchange reserves and “turned the country into a net external creditor” it said.
With this development, it forecasts the country to be a net external creditor at 15.4 percent of GDP at the end of last year, way better than the net external debtor position of 4.7 percent of GDP of those in the ‘BBB’ median.
Fitch also cited the strong expansion of domestic lending buoyed by the high liquidity situation and “generally buoyant economic conditions.”
It said the that “abundance in liquidity has not led to evidence of overheating but it is a risk that bears monitoring over the medium-term.”
The pressure that is being created by the high liquidity situation is, on the other hand, seen to ease on the back of the looming increase in US’ interest rates.
Similarly, Fitch does not expect the looming interest rate normalization in the US to result to the end of capital flows to emerging economies like the Philippines.
Amidst Fitch latest decision, Finance Secretary Cesar Purisima said the country remain to be underrated by the debt watcher but expects this to improve as the government continues to institute good governance reforms.
“Consistently robust growth and macroeconomic fundamentals built over the past 4 years affirm that the Philippine economic story is defined by sustainability, stability, and resiliency. Looking ahead, we expect credit ratings to further improve as the country continues to register even better fundamentals on the back of expanded fiscal space and continued governance reforms,” he added. (PNA)