Fitch said it is maintaining the Philippines’ Long-Term Foreign-Currency Issuer Default Rating or IDR at “BBB” with a negative outlook because while there are signs of growth and sufficient external buffers, they still detect “lagging structural indicators” such as per capita income, governance and revenue mobilization.
Fitch also reiterated its concerns on the country’s debt trajectory which it said will depend on the “balance of fiscal consolidation and ongoing government spending to support the economic recovery.” “We regard this direct monetary financing as temporary amid the exceptional circumstances of the pandemic, but it could pose risks to policy credibility and macroeconomic stability if continues beyond the immediate needs of the health crisis,” said Fitch.
He also assured that the domestic banking system remains “sound and well capitalized” and that “banks continue to serve the growing demand for credit” in a backdrop of a manageable inflation. “However, the debt watcher was also of the view that the country’s fundamental policy strategies will continue, given the decades-long track record of sound economic performance,” said the BSP.