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Fitch Ratings upgrades outlook on the Philippines

Global credit watcher Fitch Ratings on Tuesday upgraded its outlook on the Philippines, as economic growth is expected to accelerate both this year and the next.

The Philippine outlook was revised to "positive" from the previous "stable" outlook,  indicating an upward trend on the rating scale.

"The Outlook revision reflects Fitch's expectations of continued adherence to a sound macroeconomic policy framework that will support high growth rates with moderate inflation, progress on fiscal reforms that should keep government debt within manageable levels and continued resilience in its external finances," said Fitch.

Fitch said it now expects growth to accelerate to 6.4% this year and 6.5% in 2021, after slowing to 5.9% in 2019.

According to Fitch, the Philippines is likely to sustain overseas remittance inflows and "favourable" job prospects, given the falling unemployment rate and "accommodative" monetary policy.

Just last week, the Bangko Sentral ng Pilipinas (BSP) cut key policy rates by 25 basis points—the overnight borrowing rate to 3.75%, the overnight lending to 4.25%, and the overnight deposit to 3.25%.

"On current projections, the Philippines will remain among the fastest-growing economies in the Asia-Pacific region in 2020-2021, well above the current 'BBB' median," said Fitch.

It flagged, however, downside risks such as the outbreak of the 2019 novel coronavirus.

The Department of Health (DOH) on Monday reported that the number of persons under investigation (PUI) has risen to 314.

Meanwhile, over 1,000 people have so far died in China, with most deaths recorded in the provincial capital of Wuhan, the epicenter of the outbreak.

"Our macroeconomic projections are subject to downside risks, however, from the evolving coronavirus outbreak," said Fitch.

"Moreover, the Philippines is vulnerable to natural disasters that can disrupt economic activity from time to time. It is still early to evaluate the effects of the outbreak, but the economy appears somewhat less vulnerable than regional peers as tourism accounts for less than 3% of GDP. In addition, the Philippines retains room in our view for monetary and fiscal easing to offset the potential short-term impact on growth," it added.

To recall, the Philippines scored a 'BBB' rating from Fitch Ratings in 2017, indicating that expectations of default risk are currently low. — BM, GMA News

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