Fitch affirms credit grade; outlook stable

Fitch Ratings has affirmed the Philippines' "BBB" credit rating, which is a notch above the minimum investment grade, and has kept the outlook on the rating at "stable."

Since December 2017, the Philippines has maintained a "BBB" credit rating from Fitch.

The agency revised its outlook on the rating from "negative" to "stable" on 22 May 2023.

Fitch's latest decision recognizes the country's strong medium-term growth prospects, gradually declining debt, macroeconomic stability and sound economic policies.

According to Fitch, it continues to view the central bank's inflation targeting framework and exchange rate regime as credible. Since May 2022, the BSP's Monetary Board has increased the policy rate by a total of 450 basis points to 6.5 percent, to bring inflation back to within the government's target range of 2.0 to 4.0 percent. In October this year, the Philippine Statistics Authority reported that year-on-year headline inflation slowed to 4.9 percent from 6.1 percent in September.

Inflation seen to moderate

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said, "We welcome Fitch's recognition of the work being done by the central bank to bring inflation back to within the target range. The BSP will remain data dependent in managing inflation expectations in an effort to avoid the second-round effects of supply shocks."

Meanwhile, Fitch sees the real gross domestic product growing above 6.0 percent over the medium term, supported by large infrastructure investments as well as trade and investment reforms.

The PSA also reported that the Philippine economy rebounded strongly in the third quarter of 2023 with a growth of 5.9 percent, due mainly to the recovery in government spending.

Furthermore, Fitch expects the country's general government debt to decline to 54.0 percent of GDP in 2025 after peaking slightly above this level from 2023 to 2024.