Credit ratings agency Standard & Poor’s on Thursday affirmed the investment rating of the Philippines, citing healthy economic growth and a potential improvement in the country’s financial conditions.
Upheld’s long-term sovereign credit rating was “BBB+” and “A-2” with a “Stable” outlook.
“The stable outlook reflects our expectation that the Philippine economy will maintain healthy growth rates and improve its financial performance significantly over the next 24 months,” S&P said.
She indicated that the latest credit ratings reflect the country’s above-average economic growth potential, “which should lead to constructive development results and support broader credit measures.”
“We may raise the ratings if the economy recovers faster than we expect and the government achieves more rapid fiscal consolidation. We may also raise the ratings if institutional settings, which contributed to a significant boost in credit metrics in the Philippines prior to the outbreak of the pandemic over the past decade, further improve Standard & Poor’s added.
The Philippine economy grew a better-than-expected 7.6 percent in the third quarter and remains on track to meet the government’s full-year target of 6.5 to 7.5 percent.
While fiscal and government debt settings have deteriorated due to the economic repercussions of the Covid-19 pandemic, leading to dwindling fiscal buffers, S&P said “we expect consolidation as the economy recovers.”
Real GDP growth is expected to reach 6.3 percent this year on the back of strong domestic demand. The credit watchdog also predicted slower growth in 2023, at 5.7 percent.
However, inflation can restrain private consumption. The rate rose to 7.7 percent in October, exceeding the central bank’s target of 2 to 4 percent.
“The government’s need to provide support measures to combat high inflation is hampering better financial results,” S&P said. “The same applies to slightly lowered growth prospects in the face of challenging external developments.”
However, the report said, “The fiscal deficit should continue to narrow over the coming years as the economy regains strength and the government scales back stimulus measures. The medium-term fiscal framework unveiled by the new administration is expected to guide the consolidation process.”