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Fitch affirms Philippines' ‘BBB’ credit rating, negative outlook

Major credit watcher Fitch Ratings on Thursday affirmed its Philippine rating with a negative outlook, citing risks to the country’s growth prospects such as global headwinds.
In a commentary, Fitch affirmed the country’s long-term foreign-currency issuer default rating (IDR) of “BBB,” indicating that the expectations of default risk are “currently low.”
“The ‘BBB’ rating balances strong growth, external finances, and a credible economic policy framework against lagging structural indicators, including per capita income and governance, relative to peers,” it said.
However, it flagged risks to medium-term growth prospects, the fiscal adjustment path, and external buffers in an environment of higher interest rates, weaker external demand, and higher commodity prices.
Prices of consumer goods grew by 6.9% in September, driven by prices of food and non-alcoholic beverages, which climbed by 7.4% during the month.
Both the Department of Finance and the Philippine Statistics Authority expect inflation to remain high for the remainder of the year due to the weak peso and the damage caused by Typhoon Karding (international name: Noru).
The Monetary Board of the Bangko Sentral ng Pilipinas last month hiked policy rates by another 50 basis points, as it expects inflation to average 5.6% this year, higher than the target range of 2% to 4%.
Prior to this, it had raised rates by 50 basis points in August, 75 basis points in an off-schedule hike in July, and 25 basis points each in June and May.
“We think its inflation-targeting framework remains credible and we expect rates to rise further, potentially beyond our assumption of 5.25% by end-2022, if domestic inflationary pressure continues to build,” Fitch said. — VBL, GMA News