By Joann Santiago
MANILA, Sept. 24 (PNA) — Fitch Ratings on Thursday gave the Philippines’ credit rating a “positive” outlook, an improvement from “stable”, on back of the economy’s proven resiliency against external shocks because of solid fundamentals.
This development gave the country a chance for a rating upgrade within short-term.
To date, the debt watcher gives the country a “BBB-” for its foreign currency issuer default rating (IDR).
Fitch elevated the country’s credit rating to investment grade in March 2013, the first among the three major debt watchers to do it that year. Standard & Poor’s (S&P) and Moody’s Investors Service followed in May and December, respectively.
The debt watcher noted reforms under the current Aquino administration as the key for the improvement of the country’s competitiveness.
The country’s demographics, with average age of the population pegged at 23.5 years, is also an advantage since this will support higher productivity longer than other economies, it said.
“Economic growth continues to outperform ‘BBB’-rated peers, and favorable demographics support the medium-term growth outlook,” Fitch said in a report released Thursday.
The credit rater said continued decline of the Philippines’ general government debt, which currently is at 36.3 percent of gross domestic product (GDP), is better than the median of 42.4 percent among economies with a higher credit rating of BBB.
“Fitch expects the Philippines’ strong external finances will provide resilience against potential shifts in global investor sentiment, for example following tightening of US monetary policy,” it said.
With this, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco, Jr. said this is a testament of the strong fundamentals of the economy, which will buoy it through the current external headwinds.
“Sharp market volatility witnessed recently across the globe posed threats of spillover effects on the real sector of economies. What makes the Philippines an outperformer are its strong fundamentals, which entice short- and long-term capital once markets see through the temporary noise,” he said
“The positive outlook from Fitch signals the long overdue credit rating upgrade, which appropriately reflects the economy’s outperformance,” he added.
Also, Finance Secretary Cesar Purisima said the positive adjustment in the outlook is “definitely a move in the right direction” thus, he thanked the credit rater.
“While a positive credit rating action seems abstract to most, its benefits are felt in the most concrete terms. Businesses are able to borrow more easily, and everyday Filipinos find better home and car loans, for example,” he pointed out.
Purisima stressed that “standing on ever firmer fiscal positions allows us to better withstand economic turbulence, an outcome not many of our neighbors can say they are enjoying at the moment.”
“This is a layer of protection we’ve worked hard to maintain for our most vulnerable, as well as the middle class we want to keep growing,” he added.
Relatively, Investor Relations Office (IRO) Editha Martin highlighted the need to preserve these achievement beyond 2016 to prevent the deterioration of the country’s creditworthiness.
“Over the past five years, governance standards in the Philippines have improved in a manner that the international community finds hard to ignore, leading to concrete benefits such as investment grade sovereign credit ratings,” she said.
“It is everyone’s responsibility to ensure that good governance is preserved, or even enhanced, after the end of the current administration,” she added. (PNA)