MANILA – In recognition of the Philippines’ sound macroeconomic fundamentals going into the COVID-19 pandemic and its perceived ability to bounce back from the crisis, international debt watcher S&P Global today upheld the country’s “BBB+” rating with a “stable outlook.”
The affirmation of the rating—which is a notch away from the minimum score within the “A” territory— and the stable outlook, at this time of crisis is a vote of confidence which comes amid a wave of credit rating downgrades and negative outlook revisions worldwide as the pandemic wreaks havoc on productivity of economies.
The Philippines is badly hit as well, with the country’s gross domestic product (GDP) expected to contract this year after posting 84 consecutive quarters of growth.
What goes well for the Philippines, however, are its sound fundamentals going into the crisis that allow it to implement massive relief response without fear of a debt blowout.
S&P said the affirmation of the Philippines’ credit rating reflects its “expectations that the economy will continue to achieve above-average growth over the medium term, which will drive constructive development outcomes and underpin broader credit metrics.”
The debt watcher forecasts the economy to contract by 0.2 percent this year and then strongly bounce back with a growth of 9.0 percent next year.
In response to S&P’s decision, Finance Secretary Carlos Dominguez III said the affirmation of the ‘BBB+’ rating with ‘stable’ outlook is an “unequivocal recognition by S&P of the resilience of the Philippine economy” to regain its high-growth trajectory in the new normal.
“President Duterte’s prudent approach to fiscal management coupled with the implementation of bold economic reforms since he took over in 2016 have kept the country’s financial position strong and steady ahead of this corona virus pandemic that has wracked the global economy,” Dominguez said.
Dominguez said President Duterte’s reform agenda continues amid the corona virus outbreak, particularly with this latest push in the Congress for the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) bill that will be the “largest economic stimulus ever for businesses in the country and a strong signal that the Philippines is back in the game despite the contagion.”
Over the past four years, crucial reforms that improve the economy’s ability to deal with crisis situations have been implemented, such as tax reforms, liberalization of rice imports, Universal Healthcare Act, National ID System, and amendments to the BSP charter, among others.
The government’s 4-pillar socioeconomic strategy against COVID-19 includes the following: (i) emergency support for vulnerable groups and individuals; (ii) marshalling of resources to fight COVID-19; (iii) fiscal and monetary actions to finance emergency initiatives and keep the economy afloat; and (iv) an economic recovery program focused on getting businesses back on their feet to sustain and create jobs. The strategy has a combined value of Php1.74 trillion or 9.1 percent of GDP. – BusinessNewsAsia.com