Fitch Ratings on Thursday downgraded its outlook on the Philippines to factor in the impact of the global health crisis brought about by the coronavirus disease 2019 (COVID-19).
In a statement, Fitch said it revised its outlook back to "stable" indicating a downward trend on the rating scale after it was revised to "positive" in February.
"The revision of the Outlook reflects deterioration in the Philippines' near-term macroeconomic and fiscal outlook as a result of the impact of the global COVID-19 pandemic and domestic lockdown to contain the spread of the virus," the statement read.
Fitch said it now projects the Philippine economy to contract by 1% this year, following the 6% expansion in 2019. The announcement was made hours after the government announced a first-quarter economic performance of -0.2% growth.
"The 2020 forecast is uncertain and subject to considerable downside risks depending on how the virus runs its course globally and domestically and the possibility of a further extension or re-imposition of lockdown measures," it said.
"The pace of newly reported cases shows signs of flattening, but the virus nevertheless continues to spread, and partial lockdown measures that were introduced in mid-March have been extended through at least May 15," added Fitch.
The metropolis Metro Manila, along with several "high-risk areas," has been on lockdown since March 17, with the ECQ already having been extended twice to last until May 15.
In the same statement, Fitch affirmed the Philippine credit rating at "BBB," reflecting the country's fiscal and external buffers, including a lower government debt-to-GDP ratio compared with its peers.
In response to the downgrade, Philippine economic officials acknowledged that the Philippines is confronted with difficulties brought about by the pandemic.
"Structural reforms and sound economic management over the years have provided us with monetary and fiscal space to safeguard lives and support livelihoods at this critical time," Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said in a separate statement.
Diokno earlier on Thursday said the quest for an "A" credit rating will have to take a backseat while the government focuses on providing assistance to those hit by COVID-19.
"The Philippines is in a good fiscal position to deal with the unprecedented challenges posed by this contagion that has brought the global economy to the cusp of a recession," added Finance Secretary Carlos Dominguez III.
The government has so far allocated P1.4 trillion for efforts against COVID-19, which the Department of Finance said would be fully available by the end of April. — Jon Viktor D. Cabuenas/BM, GMA News