Fitch affirms PH’s ‘BBB’ rating, ‘Stable’ outlook in view of strong growth and declining debt

Fitch Ratings has affirmed the Philippines’ ‘BBB’ credit rating with a Stable Outlook in view of strong growth and declining debt in its rating action commentary released on November 10, 2023.

According to Fitch, the assessment was mainly due to the Philippines’ strong growth, gradual fiscal consolidation and reductions in government debt-to-GDP ratio, narrowing current account deficit, comfortable financing, macroeconomic stability, sound economic policies, and economic reforms.

“The favorable assessment demonstrates the Agency’s confidence in the country’s strong macroeconomic fundamentals, which can clearly be seen in our third quarter growth performance,” Finance Secretary Benjamin E. Diokno said.

Fitch recognized the country’s strong medium-term growth prospects, forecasting the Philippines to register a real GDP growth of above 6 percent over the medium term. This is considerably stronger than the median 3 percent amongst ‘BBB’ peers.

“The economic team will remain faithful to the agenda outlined in the Medium-Term Fiscal Framework (MTFF) and the Philippine Development Plan (PDP) 2023-2028. We are also committed to implementing sound policies and reforms to drive more investments that will help continue the country’s robust economic growth in the medium term,” Secretary Diokno noted.

The credit rating agency however noted the need to improve the country’s governance indicators and relatively low GDP per capita.

Recognizing the need for such improvements, the government has implemented various policies to boost governance strength and improve bureaucratic efficiency, such as the Freedom of Information (FOI); the National Government Portal and its subsequent provision of over 200 online government services; the expansion of open data features of government information; and the Ease of Doing Business (EODB) law.

On per capita income, the Department of Finance (DOF) estimates that the country will be able to reach the World Bank’s threshold for upper-middle-income status by 2025 through the PDP.

The PDP outlines strategies to deepen participatory governance; bolster public accountability and integrity; rationalize and strengthen government functions, systems, and