Fitch Ratings has revised the outlook on the Philippine national government’s credit rating as a borrower in foreign currencies to “stable” from “negative,” and kept it the investment-grade level of “BBB.”
The global credit watchdog said the revision of the outlook to stable reflected its improved confidence that the Philippines is returning to strong medium-term growth after the Covid-19 pandemic, supporting sustained reductions in the ratio of the government debt-to-gross domestic product which has risen substantially in the past few years.
“The revision also reflects our assessment that the Philippines’ economic policy framework remains sound and in line with ‘BBB’ peers, despite its low scores on World Bank Governance indicators,” Fitch Ratings said in a statement.
“The revision comes despite some relative deterioration over the last years in credit metrics that previously had been strengths, including in government debt to GDP and net external debt to GDP.
Data at the Bureau of Treasury show that the government’s debt stock ratio surged from 39.6 percent of GDP before the pandemic in 2019 to 54.6 percent in 2020, 60.4 percent in 2021, and 60.9 percent in 2022.
The foreign debt stock ratio alone rose from 13.3 percent in 2019 to 17.3 percent in 2020, 18.3 percent in 2021 and 19.1 percent in 2022.
“We project [that the national government’s debt stock ratio] will decline to about 59 percent by 2024 on strong nominal GDP growth and narrowing fiscal deficits, after inching up to 61 percent in 2022,” Fitch Ratings said.
Finance Secretary Benjamin Diokno said the Marcos administration is committed to maintain the stability of the country’s macroeconomic fundamentals through prudent fiscal management.
“We will continue to rely on structural reforms that will broaden opportunities and enhance the country’s productivity, particularly through higher investments in infrastructure,” Diokno said. “The full implementation of the six-year Medium-Term Fiscal Framework will support these investments while promoting fiscal sustainability.”