Debt watcher Fitch Ratings has kept the Philippines’ investment grade credit rating of “BBB” but will unlikely upgrade it in the near term given the global as well as domestic economic and fiscal decline caused by the COVID-19 pandemic.

In a statement Thursday night, Fitch said that its outlook for the Philippines had been downgraded to “stable” from “positive” previously.

While a “positive” outlook meant a possible credit rating upgrade in the next 18 to 24 months, reverting to “stable” meant Fitch would likely retain the same rating during the period.

“The revision of the outlook reflects deterioration in the Philippines’ near-term macroeconomic and fiscal outlook as a result of the impact of the global COVID-19 pandemic and domestic lockdown to contain the spread of the virus. Fitch projects the economy will contract this year, and that fiscal relief measures will contribute to a widening of the 2020 general government deficit by more than 3.5 percentage points of GDP (gross domestic product),” it explained.

Fitch projected the Philippine economy to contract by 1 percent this year although “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,” it said, citing that while “the pace of newly reported cases shows signs of flattening, the virus nevertheless continues to spread.”

Last Thursday, the government reported that GDP contracted 0.2 percent year-on-year during the first quarter, increasing the possibility that recession or two straight quarters of shrinking GDP may happen earlier than expected given that the ongoing COVID-19 lockdown had been extended up to mid-May.

Amid the pandemic, Fitch was less rosy about private consumption, cash remittances from Filipinos working and living abroad as well as tourism during the near term.

But Fitch maintained the Philippines’ credit rating due to 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.

Reacting to Fitch’s latest assessment, Finance Secretary Carlos G. Dominguez III said the Philippines was in a good fiscal position to deal with the unprecedented challenges posed by this contagion that has brought the global economy to the cusp of a recession.

“The government is capable of meeting the huge financial requirements of its COVID-19 response because of the prudent macroeconomic and fiscal management policies set in place by President Duterte since he assumed office in 2016. These policies plus comprehensive tax reforms have resulted in a well-balanced debt management strategy and improved revenue streams that now allow the Duterte administration to fund massive healthcare and livelihood support to save Filipino lives and protect our communities without fear of a debt blowout,” said Dominguez, who heads the economic team.

Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said that structural reforms and sound economic management over the years provided the Philippines with monetary and fiscal space to safeguard lives and support livelihoods at this critical time. —Ben O. de Vera

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