PASIG CITY, Jan. 24 (PIA) -- The Philippines' 'BBB' investment grade rating by Fitch Ratings' with stable outlook is expected to attract more investments given the country's improved credit rating.
In an interview with the Philippine News Agency, Rizal Commercial Banking Corporation chief economist Michael Ricafort said the latest affirmation of the country's credit rating defies "the adverse economic effects of the COVID-19 pandemic that led to downgrades in the outlook and credit ratings of other countries around the world."
This development, he said, "signal(s) resilience and would also encourage the entry of more foreign investments/FDIs (foreign direct investments), amid improved economic and credit fundamentals of the country, thereby increasing international investor confidence/sentiment on the country and generating more employment and other business/economic activities in the country, as needed to help sustain economic recovery/rebound after the COVID-19 lockdowns."
"The improved economic and credit fundamentals of the Philippines in recent years, amid attractive demographics, with the 12th largest population in the world at about 110 million, would make the Philippines a compelling investment destination and additional hedge for the global supply chain of various global/multinational companies looking for increased growth/sales, thereby making the country as an attractive production and marketing hub, as well as an attractive entry point to the other free trade agreement (FTA) partner countries of the Philippines," he said.
Along with the improvement of the government's fiscal performance, he expects the entry into the country of "more/bigger roster of international investments and international credit/loans at much lower cost and with better terms into the country, in view of the need to finance COVID-19 programs and other economic stimulus measures needed to help sustain the economic recovery, going forward."
The debt watcher's latest rate decision on the Philippines comes after it affirmed the country's 'BBB' rating but changed the outlook from positive to stable in May 2020.
In that same month, S&P Global Ratings affirmed its BBB+ rating with stable outlook on the country, and Moody's Investors Service affirmed its own rating at Baa2 with a stable outlook.
In June last year, Japan Credit Rating Agency (JCRA) upgraded its investment-grade rating on the Philippines from BBB+ to A-, with a stable outlook.
Fitch Ratings said its latest rate decision on the country "balances modest government debt levels relative to peers, robust external buffers and still-strong medium-term growth prospects, notwithstanding the deep pandemic-induced economic contraction, against relatively low per capita income levels and indicators of governance and human development compared to peers."
It said the pandemic's impact on the domestic economy is greater than earlier expectations "due to the domestic infection rate and government policy measures to curb the spread of the virus."
Fitch Ratings added the pandemic negatively affected private consumption and investment thus, the 10-percent contraction of the economy, as measured by gross domestic product (GDP), in the first three quarters of the year.
It forecasts full-year 2020 print to be around -8.5 percent, citing improvement in economic indicators in the last quarter.
"We expect economic activity to continue to recover in the coming quarters, and project GDP to expand by 6.9 percent and 8 percent in 2021 and 2022, respectively," it added. (PIA NCR)