Fitch Ratings, the first of the three major sovereign credit watchers to elevate the country’s credit standing to investment grade five years ago, brushed aside fears of high and persistent inflation as it affirmed the country’s credit standing as a triple B-rated economy with a stable outlook.

Fitch said price pressures should drop to within target level over the next 12 to 18 months.

Fitch analysts indicated between now and December next year, the country’s credit stature and its ability to borrow cheaply from foreign creditors was not at risk of deterioration.

At the same time, Fitch acknowledged risks to the country’s growth narrative often dubbed some of the fastest expanding in the region and around the world, saying that while local output growth measured as the gross domestic product (GDP) averaged in excess of 6 percent the past several years, the risk of overheating is limited.

“While Fitch raised concerns about everheating, it nonetheless reassured that the steps taken by the Bangko Sentral ng Pilipinas may help address these risks,” the Investor Relations Office (IRO), an adjunct of the BSP, said in a statement.

“Fitch Ratings said the Philippines’ existing investment grade rating of ‘BBB’ remains intact. Fitch cited robust economic growth, government’s comfortable debt level, and policies supporting macroeconomic stability. The ‘BBB’ is a notch above the minimum investment grade,” the IRO said.

Fitch also said the “improvement in [government] revenues should help preserve fiscal stability” even as the government pursues its bold infrastructure development agenda. In its infrastructure program, the government is set to increase spending on vital infrastructure annually from 6.1 percent of GDP this year to 7.3 percent by 2022.

As for inflation, averaging well above ceiling at 5.2 percent in June, was seen by Fitch to fall to around 3.8 percent next year as the one-off impact of the tax hikes begin to dissipate, the IRO said.

The tax hikes were incorporated in the wide-ranging Tax Reform for Acceleration and Inclusion or TRAIN Act recalibrating the personal income tax structure to put more money in the hands of the consumer and making up for the foregone revenue by appropriately adjusting the excise tax on cars, sugar and fuel.

“This is another recognition of the bold economic policy of the Duterte administration to fix the flawed tax system for the first time in over 20 years, and at the same time provide a steady revenue stream for its ‘Build, Build, Build’ infrastructure development initiative as well as for social programs that would accelerate poverty reduction and grow the middle class,” Finance Secretary Carlos G. Dominguez III said in reaction to the Fitch affirmation of the country’s credit stature.

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