Fitch Ratings affirmed the country’s investment rating of “BBB” for long-term foreign currency debt and projected a stable economic outlook.

The credit rating firm on Tuesday said they are backed by the country’s lower inflation and interest rates, and enhanced investment policies and government spending on infrastructure.

Fitch Ratings said the government should sustain revenues as households and firms continue to spend amid lower prices and borrowing costs, leading to a decent 5.6 percent overall economic growth this year.

Over the medium term, it projects over 6 percent growth.

The Philippine Statistics Authority reported inflation settled at just 2.2 percent in the first quarter, near the Bangko Sentral ng Pilipinas’ minimum target of 2 percent.

The low inflation came after the Central Bank cut its benchmark for lending rates by 75 basis points to 5.75 percent last year. It further eases the policy rate to 5.5 percent in April.

Fitch Ratings also sees minimal impact of Trump tariffs on the Philippine economy as exports represented only 12 percent last year, lower than Thailand’s 65 percent and China’s 20 percent, according to the World Bank.

“The Philippines’ terms of trade could benefit from lower commodity prices or diversion of Chinese exports,” Fitch Ratings said.

The credit rater also sees increased infrastructure projects and investor-friendly policies to support the economy.

“Large amounts of approved foreign investments suggest potential for net foreign direct investments (inward less outward) to rise from the fairly low $6 billion (just over 1 percent of gross domestic product) in 2024,” Fitch Ratings said.

Domestic risks

However, Fitch Ratings said domestic political uncertainties from the top-level rift in government could affect investors’ sentiments and delay legislative activities on proposed economic policies.

Risks from the political environment include the impeachment against the vice president and detention of her father and former President Rodrigo Duterte in The Hague, Netherlands.

“The Dutertes enjoy a strong support base in the country’s south, and their alliance with President Ferdinand Marcos was instrumental in his landslide win in the 2022 election,” Fitch Ratings said.

“Domestic political tensions have escalated ahead of midterm elections on 12 May when all seats in the House of Representatives and half of the seats in the Senate will be contested,” it added.