Robust economic growth and a strong external position remain the key strengths of the Philippines and support a stable outlook on the country’s sovereign credit, debt-watcher Fitch Ratings said.
In its latest Asia-Pacific Sovereign Credit Overview report, Fitch said it maintained the stable outlook for its BBB- Long-Term Foreign Currency and BBB Local Currency Issuer Default Ratings for the Philippines.
“The Philippines ratings are anchored by a resilient economy, a credible monetary policy framework, and a large net external creditor position,” said Fitch.
The credit ratings agency said a steady inflow of overseas Filipino remittances and the increase in the business process outsourcing industry continue to support healthy growth performance despite tighter monetary conditions.
The latest data from the government showed that cumulative personal remittances in the nine months to September rose 6.7 percent to $19.56 billion from $18.34 billion in the corresponding period in 2013.
At its October 23 meeting, the Monetary Board of the Bangko Sentral ng Pilipinas decided to keep its tightening stance as it maintained the existing rates for overnight borrowing and lending, as well as the special deposit account (SDA) and the reserve requirement ratio (RRR) for banks.
The rate for the overnight borrowing, or reverse repurchase facility stayed at 4.0 percent and the rate for overnight lending, or repurchase facility remains at 6.0 percent. The interest rate for SDA was also left unchanged at 2.50 percent, as well as 20-percent RRR for banks.
Meanwhile, Fitch noted that the continued current account surpluses over 3 percent of gross domestic product (GDP) have turned the Philippines into a large net external creditor, at 7.0 percent of GDP in 2013.
It added that strong growth and small fiscal deficits in the Philippines have led to a sustained decline in public debt ratios.
However, the ratings agency pointed out that low incomes and poor governance compared with other BBB rated range peers are the country’s key weaknesses.
The debt-watcher offered the general assessment that strong, sustained GDP growth that improves incomes and development levels along with the continuing reduction in general government debt-to-GDP ratio may support further credit ratings upgrades for the Philippines, provided the country does not experience any period of economic overheating or financial instability, or deterioration in governance standards that may pull the ratings down.