DEBT watcher Fitch Ratings said Philippine economic growth in the next five years could average above percent as the country continued to hold strong external position and macroeconomic fundamentals.
According to the Asia Pacific Sovereign Overview 3Q17 released on Wednesday, Fitch said the Philippines gross domestic product (GDP) will likely grow by 6.6 percent on average in the next five years.
The Philippines was able to grow strong without emerging “imbalances and maintenance of external buffers that are resilient to potential negative external developments.”
In 2017 alone, Fitch expects the economy to sustain a strong growth momentum of 6.8 percent and 6.7 percent in 2018.
It pointed out the country’s strong external position with current account surpluses, high levels of international reserves, and low and declining external debt.
However, it expects the current account—a main component of the balance of payments—to post a modest deficit of 0.3 percent of GDP in 2017 and 0.7 percent in 2018, based on rising capital goods imports as the government ramps up infrastructure spending.
The Duterte administration targets to spend P847 billion on infrastructure development this year covering projects in all regions, including small-, medium- and large-scale ventures to meet an infrastructure spending-to-GDP ratio of 5.3 percent.
“The Philippines remains a net external creditor and, at 13.3 percent of GDP, this is stronger than the net debtor position of the ‘BBB’ median peers, supporting its external profile,” the credit watchdog said.
In March, Fitch affirmed the Philippines’ “BBB-” investment grade rating and positive outlook, but warned it will be watching the impact of the government’s anti-illegal drugs program on the overall economy.
It offered neither an upgrade nor warned of a downgrade, saying that the affirmation recognized the country’s strong growth momentum, robust net external position, and low manageable debt levels.
At the same time, it also cited the factors at the other end of the spectrum: relatively weak governance standards, a narrow government revenue base, and below BBB- median levels of per capita income and human development.
“The Philippines’ ratings reflect its continued strong and consistent growth performance, a robust net external creditor position and government debt levels that are lower than the median of peers in the ‘BBB’ rating category,” Fitch said at that time.
The ratings remain constrained by relatively weak governance standards, a narrow government revenue base, and levels of per capita income and human development that are below the ‘BBB-’ median, it added.