‘To outperform Asean peers’
Debt watcher Standard and Poor’s (S&P) Global Ratings had revised upward its 2016 growth forecast for the Philippines, noting that the country will continue to outperform its Association of Southeast Asian Nations (Asean) peers.
In a report late Tuesday, S&P forecasted the Philippine economy to grow by 6.5 percent this year compared with a previous forecast of 6.1 percent.
The credit watchdog’s latest projection is within the 6 percent to 7 percent gross domestic product (GDP) target of the government, and higher than the 5.9 percent real GDP growth in 2015.
“The Southeast Asian economies are seeing stable growth with the Philippines outperforming the region, given its growing middle class, a business process outsourcing boom, and expansionary fiscal policy with emphasis on public infrastructure,” it said.
For 2017, S&P placed GDP growth at 6.3 percent but did not say why.
The debt watcher has affirmed the Philippines’ investment grade rating on the back of the country’s strong external position.
However, it said the Duterte administration’s campaign against illegal drugs was a threat to the economy and the country’s credit rating.
President Rodrigo Duterte’s strong focus on improving “law and order” supposedly resulted in numerous instances of extrajudicial killings since he came to power, according to S&P.
The situation could undermine respect for the rule of law and human rights, it said.
The credit watchdog believes the pressure on institutional and governance settings has the potential to hamper the ability to develop and implement swift policy responses.
“A higher rating is unlikely over our two-year ratings horizon,” it said.
The country’s economic managers on Wednesday bared their confidence that the country’s investment grade ratings from the three major credit ratings agencies – S&P, Moody’s Investor Service, and Fitch Ratings – will be maintained.
“May I say though that the Standard and Poor’s said that they will maintain our credit rating at least for the moment – they said up to two years,” Finance Secretary Carlos Dominguez 3rd said during a Senate committee hearing on his Cabinet appointment.
“Fitch and Moody’s gave me no indication of a downgrade in credit rating. I suppose if it has not improved, the worst case is it will be maintained,” he added.
In his meeting with the credit rating agencies last week in Washington D.C., Dominguez said that the debt watchers seemed satisfied by what the government has presented.
“I cannot read them, but we told them our story and we told them we have already began implementing the program that was announced early in – even before the administration came in,” he said.
Socioeconomic Planning Secretary Ernesto Pernia believes they were able to convince the debt watchers that the country’s macroeconomic fundamentals remain solid.
“If we maintain the performance of the economy, then we can get a further upgrade,” Pernia, who is also the National Economic and Development Authority director general, told reporters on the sidelines of a business forum.
The Philippine economy likely expanded by at least 7 percent in the first three months of the Duterte administration coincided with the third quarter of 2016.
“We hope it [GDP] should be at least 7 percent,” the NEDA chief said.
The expansion in the quarter will be driven by the massive infrastructure spending of the Duterte administration, he added.