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Fitch downgrades PH credit outlook to stable

By Mayvelin U. Caraballo, TMT/The Manila Times

In this Nov. 4, 2018 file photo, part of the Makati central business district is seen at night. (TMT file photo)

Fitch Ratings on Thursday lowered its outlook for the Philippines’ “BBB” investment-grade credit rating from positive to stable because of the impact of the coronavirus disease 2019 (Covid-19) pandemic on the country’s economy.

In a statement, the credit rating agency explained that the “revision of the outlook reflects [the] deterioration in the Philippines’ near-term macroeconomic and fiscal outlook as a result of the impact of the Covid-19 pandemic and [the] domestic lockdown to contain the spread of the virus.”

The Philippines previously secured from Fitch in February the positive outlook, which was seen as an indication that the country’s credit rating was one step closer to being upgraded.

Fitch forecasts the economy to contract by 1 percent this year after expanding by 6 percent in 2019.

If correct, the projection would settle below the government’s revised growth assumption of -0.8 to zero percent for 2020.

“The 2020 forecast is uncertain and subject to considerable downside risks depending on how the virus runs its course globally and domestically and the possibility of a further extension or re-imposition of lockdown measures,” the debt watcher said.

Fitch also sees the government’s fiscal relief measures to contribute to a widening of the 2020 general government deficit by more than 3.5 percentage points of the country’s gross domestic product (GDP).

“Under our baseline assumptions, we expect the general government debt/GDP ratio to rise to about 46 percent of GDP by 2021 from about 35 percent estimated by Fitch for end-2019, which would be below the projected 2020 ‘BBB’ median,” it said.

The credit rater also affirmed the Philippines’ “BBB” rating, which reflects the country’s fiscal and external buffers, including its lower government debt/GDP ratio, compared with peer medians and net external creditor position, as well as its still-strong medium-term growth prospects.


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