Fitch affirms Philippines’ investment grade but warns overheating risks 'remain in place'
MANILA, Philippines — Fitch Ratings on Thursday kept the Philippines’ investment-grade rating, pointing to the nation’s “favorable” growth prospects even as it flagged that overheating risks “remain in place.”
The international debt watcher said it has affirmed the Philippines' long-term foreign-currency issuer default rating at “BBB,” which signifies adequate capacity for payment of financial commitments that could be impaired by adverse business or economic conditions.
Fitch also kept its ratings outlook on the Philippines at “stable.”
This aligns the agency’s ratings on the Southeast Asian country with the other two of the so-called “big three” debt watchers, Moody’s Investors Service and S&P Global Ratings. A higher rating can lower the cost of borrowing in foreign currencies and can increase the country’s ability to attract foreign investment.
“Growth prospects remain favourable, supported by strong domestic demand and increasing infrastructure investment,” Fitch said in a statement.
“However, Fitch believes that overheating risks remain in place, highlighted by rapid credit growth and a widening current-account deficit, although the central bank's stated intention is to remain vigilant against developments that could affect the inflation outlook,” it added.
Red-hot inflation and surging borrowing costs have already weighed on consumer spending, which has traditionally been the driving force behind growth in the Philippines, and crimped economic expansion to a three-year low of 6.1 percent in the third quarter.
Last July, Fitch warned a widening current account deficit, high inflation and rapid credit growth as signs of overheating.
In the same statement, the credit rater expects inflation to remain elevated this year before returning to the government’s 2-4 percent target range in 2019 and 2020, as previous monetary responses continue to work their way through the economy and as the impact of excise tax hikes in 2018 dissipates.
Similar to other countries in the region, Philippine economic growth could “come under downward pressure,” Fitch said, citing the slowdown in China and escalating trade tensions with the US, as well as rising domestic and global interest rates. — Ian Nicolas Cigaral
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