S&P confident Philippines can sustain strong growth
Standard & Poor's (S&P) has expressed confidence on the ability of the Philippines to sustain strong economic growth, raise per-capita incomes, and keep a healthy macroeconomic picture at least over the short term, the Investment Relations Office of the central bank said Monday.
In its latest rating decision on the Philippines announced Friday, S&P affirmed the country's "BBB" rating with a "stable" outlook.
The rating is a notch above the minimum investment grade, and the outlook indicates likelihood that the rating will stay the same at least over the next 12 to 18 months.
A rating within the investment-grade scale is a seal of good economic housekeeping that signals ability and willingness to pay debts as they fall due. As such, it helps boost a country's image before the international community, including foreign investors.
Central bank governor Amando M. Tetangco, Jr. welcomed the latest decision of S&P.
"The favorable credit rating actions bestowed on the country over the years by major international credit watchdogs, including the latest affirmation by S&P of the country's BBB/stable rating, is recognition in part of sound and calibrated monetary policy and banking supervision that have helped steer the economy to its enviable position of strength even amid a challenging external environment," said Tetangco
In its report, S&P cited the encouraging economic conditions in the Philippines and the Duterte administration's push for more development spending.
"High household consumption, investment, and exports (mainly of electronics, commodities, and services) continue to support economic activity. These strengths will likely be underpinned by strong household and company balance sheets, sound growth in jobs and income, inward remittance flows, and an adequately performing financial system," S&P said.
Under its macroeconomic forecasts, the Philippines will continue to register fast pace of economic growth at 6.6 percent this year, 6.4 percent next year, 6.6 percent in 2019, and 6.3 percent in 2020.
"We believe the Duterte administration will broadly continue with the fiscal and economic development policies of the previous administration, albeit with a more aggressive expenditure push," the credit-rating firm added.
S&P projected that per-capita income in the Philippines would hit $2,950 this year and would grow by an average of 4.9 percent over the period 2017-2020.
It also recognized the strong external payments position, boosted by dollar inflows in the form of remittances, business process outsourcing (BPO) revenues, and tourism receipts.
The current account will likely stay in surplus, S&P added, at 0.6 percent of GDP this year, 1.0 percent next year, 1.2 percent in 2019, and 1.1 percent in 2020.
S&P said the Philippines would remain a net external creditor to the rest of the world, with its net external debt likely to average -24.8 percent of GDP from 2017-2022 (a negative figure indicates net external creditor position).
It also projected the government's budget deficit would be kept at a prudent level of 2.8 percent of GDP from 2017-2022, and the net general government debt at a manageable level of 25 percent of GDP by 2022.
Finance Secretary Carlos Dominguez III said the continued positive assessment of S&P on the Philippines is one more incentive for the government to “go ahead full throttle” on its “DuterteNomics” agenda to sustain the growth momentum and achieve economic inclusion in the medium term.
As for S&P’s concerns over downward risks to growth such as uncertainties in export markets and inadequate infrastructure, Dominguez said: “These are already being addressed by (1) President Duterte’s rebalancing of foreign policy with a focus on greater integration with our Southeast Asian neighbors and trading partners China, Japan, and South Korea, and our (2) ambitious plan to invest P8 trillion between now and 2022 in closing the country’s yawning infrastructure gap.” DMS