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Timely vote of confidence

The affirmation of the BBB+ rating with stable outlook is an unequivocal recognition by the S&P of the resilience of the economy.

Joshua Lao

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S&P told economic managers to expect a rating upgrade “over the next two years” if the economy recovers much more quickly than expected.

Economic managers welcomed S&P Global Ratings’ decision to retain the BBB+, or two notches above investment grade, assessment which is widely considered as a vote of confidence on the economy.

Finance Secretary Carlos Dominguez III expressed his satisfaction with the credit score which he said mirrors S&P’s recognition of the country’s ability to recover from the pandemic.

“The affirmation of the BBB+ rating with a stable outlook is an unequivocal recognition by the S&P of the resilience of the economy to regain its growth trajectory in the new normal,” Dominguez said.

“We are confident that to our govenrment’s four-pillar strategy to deal with the pandemic will see us through this global health emergency as we remain focused on saving lives and protecting communities while gradually lifting mobility restrictions to restart the economy and get people back to work,” he added.

In a report, S&P expected the Philippines’ economy to achieve a strong recovery from 2021, following a deep slowdown due to the coronavirus disease (COVID-19) pandemic.

“Although the economic slowdown will weigh heavily on fiscal and debt metrics over the near term, we expect a meaningful stabilization over the next three to four years owing to
strong economic fundamentals and generally orthodox policymaking,” it added.

Thus, S&P underlined the stable outlook reflects expectations that “the economy will achieve strong growth from 2021, and its fiscal deficits will decline meaningfully after a significant rise in 2020.”

Wait till crisis over
Acting Socioeconomic Planning Secretary Karl Kendrick Chua shared the same sentiment as he stressed the country’s robust macroeconomic fundamentals to allow the government achieve its goals despite the health crisis.

“No country has been spared from the economic effects of this global pandemic, but our strong economic fundamentals and inclusive recovery measures will power our return to growth,” Chua said.

“Thanks to our ample buffers and fiscal space, we can jumpstart domestic demand by investing more in healthcare, infrastructure, and the entire food value chain,” he added.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno expressed an openness to deploy more monetary tools should circumstances warrant it, given the ample legroom the central banks has.

“Thanks to critical institutional reforms and sound policy management, we are in the advantageous position of having monetary space to carry out further easing, if necessary,” Diokno said.

Ample space
“While being mindful of our price and financial stability mandates, we are thinking outside the box to enact policies that ultimately help safeguard the lives and livelihoods of our people. Such is our solemn responsibility in this once-in-a-lifetime crisis, and I am confident that our approach will demonstrate the resilience of our country,” he added.

The credit watchdog expects the economy to contract by 0.2 percent for 2020. Nevertheless, it penciled a strong recovery of nine percent for 2021.

“Although the economic slowdown will weigh heavily on fiscal and debt metrics over the near term, we expect a meaningful stabilization over the next three to four years owing to strong economic fundamentals and generally orthodox policymaking,” S&P explained.

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