DOF welcomes Fitch affirmation of Philippines’ ‘BBB’ rating

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By Francis Allan L. Angelo

Finance Secretary Ralph G. Recto has welcomed Fitch Ratings’ recent affirmation of the Philippines’ BBB credit rating with a stable outlook, seeing it as a signal of strong growth momentum in the medium term and a boon for ordinary Filipinos.

“This affirmation is highly encouraging as it shows a strong vote of confidence in our ability to grow the Philippine economy on a higher path over the medium term,” Recto said in a press statement.

“Any rating affirmation or upgrade is a major win for all Filipinos as this means that the Philippines can have more access to cheaper financing from global capital markets. A better credit rating will help us create more jobs and reduce the poverty rate.”

Fitch Ratings affirmed the Philippines’ credit rating in a report dated June 7, 2024, highlighting the country’s robust economic prospects.

The credit rating agency expects the Philippine economy to expand by 5.8% in 2024, with GDP growth forecasted to exceed 6% over the medium term, significantly outpacing the ‘BBB’ median of 3%.

The strong growth momentum, according to Fitch, will be bolstered by substantial investments in infrastructure and reforms aimed at fostering trade and investment, including public-private partnerships (PPPs).

The report acknowledged the Marcos Jr. administration’s continued efforts to advance structural economic reforms to stimulate private investments.

Fitch noted the positive impact of economic liberalization laws passed in 2022 and the issuance of implementing rules and regulations for the new PPP law in March 2024 on medium-term economic growth.

These measures are expected to enhance the investment climate and attract more foreign investments, thereby creating better employment opportunities for Filipinos.

The credit rating agency also highlighted the stability of the Philippines’ debt profile, projecting a gradual reduction in the general government (GG) debt-to-GDP ratio to 54% by 2025.

Strong nominal GDP growth and narrowing fiscal deficits are key factors contributing to this downward trend.

Fitch’s forecast aligns with the Philippine government’s fiscal deficit-to-GDP ratio targets of 5.6% in 2024 and 5.2% in 2025, underscoring the importance of improved tax collection and spending efficiencies for achieving fiscal consolidation.

“The Philippines’ high credit rating sends a signal of confidence to investors and creditors, resulting in lower interest rates and better returns for Philippine bonds,” Recto added. “It also attracts more foreign investments into the country, which will create better employment opportunities for Filipinos.”

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