Fitch Highlights PH’s Inflation Gains, Sound Policies

Fitch Ratings has acknowledged the Philippines’ sound monetary policy and inflation slowdown, which it said are helping sustain economic growth.

The credit rating agency noted that inflation in the country averaged 3.2 percent in the first 11 months of 2024, a significant improvement from the 6.0 percent average recorded last year.

To curb inflation and keep it within the target range of 2.0 to 4.0 percent, the Bangko Sentral ng Pilipinas (BSP) raised interest rates three times in 2023, totaling 100 basis points.

The last rate hike was an off-cycle adjustment of 25 basis points in October 2023.

Inflation has since eased, settling at 2.5 percent in November 2024.

With inflation under control, the BSP shifted to a more growth-supportive stance this year, cutting interest rates by 25 basis points in both August and October.

Fitch projects the Philippine economy to grow by 5.7 percent this year, accelerating to 5.9 percent in 2025 and 6.2 percent in 2026.

“The BSP’s proactive measures in curbing inflation, followed by a cautious approach in supporting growth, reflect their adaptability and effectiveness,” Fitch said in a recent credit update report.

BSP Governor Eli Remolona emphasized the importance of the central bank’s dual goals of price stability and growth.

“The monetary policy adjustments we made, combined with our capital market initiatives, aim to ensure that inflation remains within target while fostering a conducive environment for economic expansion,” Remolona said.

Among its key initiatives, the BSP has partnered with the banking sector to roll out Peso Interest Rate Swaps (Peso IRS).

These swaps are expected to enhance trading and liquidity in the local bond market, attracting both domestic and foreign investors.

Fitch’s recognition comes after other positive developments in the Philippines’ credit profile.

Last November, S&P upgraded its outlook on the country’s BBB+ rating to positive, while Japan-based R&I raised the country’s rating to A- in August.

Economic analysts view these upgrades as signals of growing confidence in the Philippines’ fiscal and monetary policies, as well as its long-term growth prospects.