Fitch upgrades Philippines' outlook to positive

MANILA, Philippines - The Philippines received another upgrade from Fitch Ratings on the back of the country’s strong macroeconomic fundamentals as well as the improved government standards and competitiveness indicators under the Aquino administration.

Fitch upgraded yesterday the country’s outlook to positive from stable as it affirmed the credit rating at “BBB-“ or minimum investment grade.

BSP Governor Amando Tetangco, Jr. said the positive outlook from Fitch signals the long overdue rating upgrade to reflect the economy’s outperformance that would help it withstand risks posed by the global economy.

 “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,” Tetangco said.

Finance Secretary Cesar Purisima said the revised credit outlook and the likely credit rating upgrade are a reflection of what financial markets say all along about the Philippines’ creditworthiness.

“The Philippine economy continues to perform strongly despite turbulent headwinds, while financial markets continue to assess Philippine debt way better than what a BBB- rating reflects,” he added.

The Finance chief pointed out the Philippines is still underrated as it continues to outperform its single-A rated neighbors in Southeast Asia.

“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. 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,” he said

Editha Martin, executive director of the Investor Relations Office (IRO), stressed the need to preserve beyond 2016 the gains in good governance to avoid a deterioration in the country’s much improved creditworthiness.

The debt watcher said the upgrade reflects the steady improvement of the governance standards and competitiveness indicators under the Aquino administration.

Likewise, it added the country’s global competitiveness in the World Economic Forum (WEF) has risen to a level comparable to ‘BBB’-rated peers.

Fitch likewise cited indicators for corruption, transparency and economic freedom have also improved substantially.

“Evidence that governance improvements can be sustained beyond the next election cycle would be positive for the credit,” the rating agency added.

With the upgrade, Fitch could upgrade the country’s sovereign credit rating over the next 18 months, especially if the improvement in governance standards over the Aquino administration would be sustained following a change in government.

Likewise, the country’s credit rating would be upgraded if the strong gross domestic product (GDP) growth without the emergence of imbalances would be sustained and if the general government revenue base that lends greater stability to the government finances would be broadened.

Fitch upgraded the country’s credit rating to ‘BBB-‘ equivalent to minimum investment grade in March last year.

The debt watcher said the country’s economic growth continues to outperform “BBB”-rated peers and favorable demographics support the medium-term growth outlook.