Fitch’s new outlook signals stabilizing economy—DBM

The Department of Budget and Management (DBM) said that Fitch Rating’s favorable credit outlook upgrade proves that the country’s economic condition is now stabilizing following the pandemic.

In a statement, Budget Secretary Amenah F. Pangandaman said Fitch’s decision to raise the Philippines’ outlook to “Stable” from “Negative” along with the affirmation of its investment grade status is a welcome development.

“This development indicates that the country’s growth now stabilizes with continued strong economic activities and that we are determined to achieve a steady improvement in our growth guided by our Medium-Term Fiscal Framework,” Pangandaman said.

This improved outlook signals the country’s creditworthiness, allowing it to access funding from development partners and international capital markets at lower cost.

“This means that the Philippine credit conditions have already started to firm up its trajectory towards reducing its borrowing cost and likewise lowering its debt burden as a percent of gross domestic product (GDP),” Pangandaman said.

Fitch maintained the ‘BBB’ credit rating for the Philippines, which is one notch above the minimum investment grade.

It is also a vote of confidence on the country’s ability to fulfill its financial commitments, Pangandaman said.

“Fitch’s improved outlook is a welcome development leading to the attainment of our fiscal consolidation goals and the achievement of more fiscal space for the government’s priority agenda and projects,” the budget chief added.

According to Fitch, the revision of the outlook to Stable reflects its improved confidence that the Philippines is returning to strong medium-term growth after the Covid-19 pandemic, supporting sustained reductions in government debt/GDP, after substantial increases in recent years.

The report also said that the revision reflects Fitch’s assessment that the Philippines’ economic policy framework remains sound and in line with ‘BBB’ peers.

“Fiscal conditions are already improving, leading to reduced government borrowing costs. In short, fiscal consolidation is already taking place at this point, early in the first year of President Ferdinand R. Marcos Jr.’s administration,” Pangandaman said.

“We will continue to sustain our country’s productivity, consistent with our Medium-Term Fiscal Framework,” she concluded. — Chino S. Leyco