Fitch affirms Philippines’ BBB credit rating, stable outlook

By Francis Allan L. Angelo

Fitch Ratings has reaffirmed the Philippines’ “BBB” investment-grade credit rating with a “stable” outlook, maintaining a status first assigned in December 2017.

The decision highlights the country’s robust medium-term growth potential, stable debt levels, and strong macroeconomic policies, alongside the Bangko Sentral ng Pilipinas’ (BSP) credible inflation targeting framework.

Since May 2022, the BSP has raised the policy rate by 450 basis points to 6.5 percent to bring inflation within the government’s target range of 2.0 to 4.0 percent.

In May 2024, the Philippine Statistics Authority (PSA) reported a slight rise in headline inflation to 3.9 percent from April’s 3.8 percent, with the national average for January to May 2024 at 3.5 percent, down from 6.1 percent in May 2023.

Fitch projects inflation to remain within the upper half of the BSP’s target range, moderating to 3.8 percent in 2024 and 3.4 percent by 2025.

BSP Governor Eli M. Remolona, Jr. welcomed Fitch’s recognition, highlighting the BSP’s data-driven approach to setting monetary policy.

Looking ahead, Fitch forecasts a 5.8 percent real GDP growth in 2024, driven by investments in infrastructure and trade reforms, with over 6.0 percent growth expected over the medium term.

In the first quarter of 2024, the economy grew by 5.7 percent year-on-year, propelled by robust growth in financial activities (10.0 percent), wholesale and retail trade, repair of motor vehicles and motorcycles (6.4 percent), and manufacturing (4.5 percent), according to the PSA.

Fitch also expects the general government debt to remain stable at 54 percent of GDP by 2025, alongside a narrowing current account deficit.

The debt watcher sees the current account deficit decreasing to under 2.0 percent of GDP (below USD10 billion) by 2025, from 2.6 percent of GDP (over USD11 billion) in 2023.

An investment-grade rating signals reduced credit risk, allowing countries to access funding at lower costs.

A ‘BBB’ rating indicates a low expectation of default risk, with the country’s capacity to meet financial commitments deemed adequate.

A “stable” outlook suggests a low likelihood of a rating change over the next one to two years.