Fitch affirms PHL's investment grade rating, positive outlook 

Credit rating agency Fitch Ratings on Wednesday affirmed the Philippines' investment grade credit rating with a positive outlook for both foreign and local currency denominated obligations.

In a statement, Fitch said it affirmed the country's long-term foreign and local-currency issuer default ratings at 'BBB-' or "good credit quality" as well as the positive outlook for the ratings.

A rating within the 'BBB' category means that expectations of default risk are currently low and the capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity.

A positive rating outlook, meanwhile,  indicates an upward trend for a credit rating over a one-to two-year period. 

"The Philippines' ratings reflect its continued strong and consistent growth performance, a robust net external creditor position and government debt levels that are lower than the median of peers in the 'BBB' rating category," Fitch explained.

The debt watcher, however, said that the country's score was constrained by relatively weak governance standards, a narrow government revenue base, and levels of per capita income and human development that are below the 'BBB' median.

GDP

In affirming the credit rating, Fitch cited the Philippines "strong economic growth."

Real gross domestic product grew by 6.8 percent in 2016, up from 5.9 percent in 2015, supported by continued strong growth in private consumption spending and investment, the debt-watcher said.

It added that the Philippines' average real GDP growth for the five years to end-2016 was 6.6 percent and well above the 'BBB' median of 3.2 percent.??

"Fitch expects the economy to sustain its strong growth momentum, with GDP forecast to increase by 6.8 percent and 6.7 percent t in 2017 and 2018, respectively," Fitch said.

Incidents of violence

The debt-watcher also took note of President Rodrigo Duterte's triumph in the May 2016 elections.

"Macroeconomic performance has remained strong despite the increase in incidents of violence associated with the administration's campaign against the illegal drug trade while domestic political stability has been maintained," it said.

"Fitch will continue to monitor the impact of the president's campaign against drugs on economic performance, financing flexibility and capital flows. In terms of the broader policy agenda, the new administration has adopted a 10-point socio-economic plan, which signals broad continuity of policies under the previous administration," it added.

Fitch noted that the Philippines was a strong net external creditor.

"The Philippines' current account has been in surplus since 2003, which has led to a steady increase in its foreign-exchange reserves and supports its net external creditor position," it said.

"At end-2016, the Philippines net external creditor position was close to 13 percent of GDP, compared with the 'BBB' median of a net debtor position of 0.7 percent of GDP," it added.?

Fitch said it expects the country's current account to move into a modest deficit over 2017-2018 as increased spending on infrastructure is likely to drive strong growth in capital-goods imports.

"The Philippines' current account will, however, remain supported by a steady inflow of remittances, which increased by about 5 percent in 2016, and strong growth in services receipts related to the BPO industry," the debt-watcher added. — DVM, GMA News