Fitch maintains ‘negative’ PH outlook amid uncertain recovery and debt issues

Metro Manila (CNN Philippines, February 18) — Fitch Ratings maintained its “negative” outlook for the Philippines as risks threaten its economic rebound from the COVID-19 health crisis.

The outlook “reflects uncertainty about the medium-term growth outlook as well as possible challenges in unraveling the policy response to the health crisis and bringing public debt onto a firm downward path,” the credit assessor said. world, which also maintained the “BBB” of the country. credit rating.

While its forecast for growth of 6.9% in 2022 and 7% next year outpaces expansion of 5.6% in 2021, Fitch Ratings warns of downside risks to the recovery. These may stem from potential pandemic-related scarring effects on medium-term growth and possible waves of COVID-19 from new variants.

“The presidential elections scheduled for May 2022 also create uncertainty around post-election fiscal and economic strategy, although we assume that broad political continuity will be maintained given the Philippines’ record of a generally strong political framework,” he said in a report released Thursday evening. .

Fitch Ratings said the outlook “also reflects weak government revenue mobilization relative to peers and government debt/GDP which has risen sharply from pre-Covid-19 levels but is expected to remain close to median “BBB” over the next few years.

“The Philippines’ debt trajectory will depend on the balance of ongoing fiscal consolidation and government spending to support economic recovery,” Fitch Ratings said, adding that it expects the public debt ratio / GDP reaches 54.5% this year and 53.1% in 2023.

RELATED: PH loans shrink to ₱11.72 trillion at end of 2021; highest debt-to-GDP ratio in over 15 years

The rating agency also reported that the country’s structural indicators – such as per capita income as well as World Bank and UN-based governance and human development standards – remain weaker compared to its peers.

In a joint statement, the Ministry of Finance and Bangko Sentral ng Pilipinas outlined how the debt watcher expects the country’s fundamental policy strategies to continue moving forward.

“The government has taken on the enormous cost of responding to the COVID-19 crisis to help vulnerable sectors survive and recover from the crisis, thanks in large part to President Duterte’s comprehensive tax reform program and to its policy of prudent budgetary management and discipline. But we are also concerned about not passing on an unsustainable debt to future generations,” said DOF chief Carlos Dominguez III.

Meanwhile, BSP Governor Benjamin Diokno explained how price stability and financial stability will help spur economic recovery, citing in particular rising credit activity and a “favorable” inflation outlook.

“The Philippine banking system has managed the impact of the crisis. Philippine banks continue to meet growing demand for credit. We also expect inflation to remain well within the target range of 2.0-4.0% this year through 2024, which will provide a conducive environment for consumption and investment,” said Diokno.

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