MANILA, Philippines - Fitch Ratings said yesterday the sustainability of economic growth and improvements in governance under the Duterte administration are crucial in the assessment of the country’s credit ratings.
Sagarika Chandra, associate director for sovereigns at Fitch, said there is now clarity in the policies after incoming President Rodrigo Duterte laid down his administration’s eight-point economic agenda.
“As clarity emerges over the new administration’s policies, our sovereign ratings assessment will continue to focus on the sustainability of economic growth and improvements in governance,” Chandra said.
Last April 8, Fitch affirmed the ‘BBB-‘ or minimum investment grade sovereign rating of the Philippines on the back of a positive outlook reflecting economic growth, fiscal and external finances as well as improved governance under the administration of outgoing President Aquino.
Duterte has said he lacks economic expertise and could continue the reforms of the outgoing Aquino administration.
Duterte’s eight-point economic agenda commits to “maintain the current macroeconomic policies,” continue to improve tax collection, address infrastructure bottlenecks, and promote foreign investment and competitiveness.
It also reiterates campaign pledges to boost education and rural development.
“We expect more detail to emerge as Cabinet appointments are made, or in the state of the nation address expected on July 25,” she added.
Fitch sees the country’s gross domestic product (GDO) growth inching up to 5.9 percent this year from 5.8 percent last year. This would be close to the 2010-2015 average of 6.2 percent and well above the ‘BBB’ category median of 2.6 percent.
“We think strong fundamentals will support growth momentum if current macroeconomic policy settings are broadly maintained. China’s slowdown has seen net exports drop, but remittance flows have supported private consumption, as well as helping maintain a current account surplus,” Chandra said.
At close to 18 percent of GDP, Philippines’ estimated net external creditor position for 2016 contrasts with the ‘BBB’ median’s net debtor position of 5.7 percent of GDP.