Philippines seen to remain fastest-growing Asean economy

MANILA, Philippines - Fitch Ratings expects the Philippines to maintain its position as the fastest growing economy in Southeast Asia with an average gross domestic product (GDP) growth of 6.6 percent over the next five years.

In a report, Fitch said the ‘BBB-‘ rating and positive outlook for the Philippines is supported by the continued strong macroeconomic performance, a net external creditor position, and government debt levels that are below its peers.

The projected GDP growth over the next five years would be faster than Vietnam’s 6.1 percent, Indonesia’s 5.1 percent, Malaysia’s 4.9 percent, Singapore’s 2.9 percent, Thailand’s 2.6 percent, and Taiwan’s two percent.

Economic managers, through the Cabinet-level Development Budget Coordination Committee (DBCC), kept the country’s GDP growth target at 6.5 to 7.5 percent this year and seven to eight percent for 2018.

The Philippines emerged as one of the fastest growing economy in the region last year after the economy expanded 6.9 percent from 5.9 percent in 2015 as election-related spending boosted private consumption.

Last March 29, Fitch reaffirmed the country’s rating at ‘BBB-“ or minimum investment grade on a positive outlook.

The debt watcher said positive factors for the Philippines include the continued strong growth without emergence of imbalances and maintenance of external buffers that are resilient to potential negative external developments.

Global financial markets remained volatile due to the series of interest rate hikes by the US Federal Reserve, the decision of the United Kingdom to leave the European Union, and the protectionist policies of US President Donald Trump.

Fitch said the further broadening of the government’s revenue base through the passage of the first package of the comprehensive tax reform program (CTRP) by the House of Representatives would result to greater stability in government finances.

“The lower house passed the first part of a CTRP in early June 2017, underscoring the importance the new administration attaches to the tax-reform initiative. The reforms aim to lower personal and corporate tax rates while expanding the tax base, resulting in a net-positive gain to government revenue,” Fitch said.