<\/p>\n
By Justine Irish D. Tabile, <\/b>Senior Reporter<\/i><\/p>\n
THE PHILIPPINES might miss <\/span>its goal of achieving an \u201cA\u201d-level <\/span>credit standing inside the subsequent two <\/span>years as one other debt watcher cut <\/span>its outlook for the country, with the Middle East war and slowing <\/span>public investments putting the <\/span>country\u2019s growth prospects in danger.<\/span><\/p>\n On Monday, Fitch Rankings affirmed the Philippines\u2019 long-term foreign-currency issuer default rating<\/span> at \u201cBBB\u201d but downgraded its <\/span>outlook to \u201cnegative\u201d from \u201cstable.\u201d<\/span><\/p>\n \u201cThe outlook revision reflects rising risks to the Philippines\u2019 strong medium-term growth prospects from recent disruptions to public investment, exacerbated within the near-term by elevated exposure to the continuing global energy shock. These challenges could narrow the country\u2019s GDP (gross domestic product) growth outperformance relative to peers, amid higher post-pandemic government debt and a gradual and sustained deterioration in its external finance position,\u201d it said.<\/p>\n \u201cThe affirmation reflects our baseline that, despite rising risks, medium-term GDP growth will remain robust, supporting a gradual reduction in government debt.\u201d<\/p>\n A \u201cnegative\u201d outlook from a credit rater means it sees the next likelihood of a downgrade over the subsequent two years.<\/p>\n The federal government is aiming to realize an \u201cA\u201d level rating by 2028 or the tip of the Marcos administration.<\/p>\n Fitch last gave the Philippines a \u201cnegative\u201d outlook in 2021 throughout the coronavirus pandemic, which it later aff<\/span>irmed throughout 2022. This was revised back to \u201cstable\u201d in May 2023.<\/p>\n Earlier this month, S&P Global Rankings also revised its outlook for the Philippines to \u201cstable\u201d from \u201cpositive\u201d but aff<\/span>irmed the country\u2019s \u201cBBB+\u201d long-term rating because it expects the country\u2019s fis<\/span>cal and external position to come back under pressure because of the Middle East conflict.<\/p>\n War-driven shocks are prone to upset growth and inflation outcomes as they discourage investment and household consumption, said GlobalSource Partners Philippine Analyst and Principal Advisor Diwa C. Guinigundo, who can also be a former central bank deputy governor.<\/p>\n \u201cIn the method, it may additionally increase the country\u2019s risk profile and further moderate the expansion momentum,\u201d he said in a Viber message.<\/p>\n \u201cIf these geopolitical risks should proceed beyond this yr, and no decisive policy actions are forthcoming, achieving an \u2018A\u2019 investment grade rating couldn’t occur within the last two years of this administration.\u201d<\/p>\n Fitch\u2019s move to downgrade its rating outlook reflects the country\u2019s high exposure to risks from the Iran war, he added.<\/p>\n \u201cWe’re overly depending on imported oil, our fiscal space continues to narrow, and inflation is prone to breach the goal for 2026.\u201d<\/p>\n Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said the \u201cnegative\u201d outlook is a \u201creality check\u201d relatively than a crisis.<\/p>\n \u201cThe upgrade story is clearly over, and the Philippines is now in defense mode. Other agencies could revise outlooks, but a downgrade will not be imminent so long as growth stabilizes, inflation is contained and monetary execution improves,\u201d he said in a Viber message.<\/span><\/p>\n \u201cThe chance is obvious: if oil prices stay high and the current-account <\/span>de<\/span>fi<\/span>cit<\/span> widens and not using a strong policy response, the cushion protecting our \u2018BBB\u2019 rating gets very thin.\u201d<\/span><\/p>\n Surging oil prices and dwindling fuel reserves have pushed the Philippine government to place the country under a one-year state of national energy emergency and suspend excise taxes on liquefied petroleum gas and kerosene.<\/span><\/p>\n The Bangko Sentral ng Pilipinas (BSP) expects inflation to average 5.1% this yr, well above its 2%-4% goal and last yr\u2019s 1.7% print, because the conflict\u2019s impact on global crude oil prices is prone to push up domestic food, energy, and transport costs.<\/p>\n In March, the buyer price index already breached the central bank\u2019s goal because it accelerated to 4.1% because of rising fuel prices.<\/p>\n For its part, Fitch sees inflation averaging 4.1% in 2026. \u201cRisks are tilted towards higher inflation if the shock is prolonged, adding to affordability challenges for households.\u201d<\/p>\n FISCAL CONCERNS \u201cThe medium-term fiscal consolidation could also be delayed due to the need for fiscal support to the economy, including those for vulnerable sectors,\u201d he said. \u201cThat might further erode market confidence within the country\u2019s economic prospects.\u201d<\/p>\n He said, \u201cmitigating measures could also be difficult to ascertain at this point because the issues are structural, and they can’t be done within the short term.\u201d<\/p>\n \u201cWe should always have done our homework a long time ago.\u201d<\/p>\n Fitch said it expects the federal government\u2019s fiscal consolidation plan to proceed progressively over the subsequent few years.<\/p>\n \u201cWe expect the final government fiscal deficit to be regular at 3.7% of GDP in 2026. That is consistent with a stable National Government deficit of 5.6% of GDP, barely above the 5.3% budget goal, as we expect weaker growth to weigh on revenues. Targeted energy subsidies limit fiscal risks, though a protracted energy shock could lead on to fiscal risks from greater social pressures to spice up spending,\u201d it said.<\/p>\n \u201cRisks are tilted toward a slower pace of deficit reduction as we imagine the federal government is prone to prioritize GDP growth objectives and social stability.\u201d<\/p>\n The conflict\u2019s impact on the country\u2019s credit profile will likely manifest through \u201clower GDP growth, higher inflation and a rising current account deficit, with modest risks to public funds,\u201d it added.<\/p>\n It expects the economy to expand by 4.6% this yr, below the federal government\u2019s 5%-6% goal, because it sees public spending \u2014 which was stalled by a graft scandal tied to flood control projects, resulting in a post-pandemic-low GDP growth of 4.4% in 2025 \u2014 recovering only progressively. Higher energy costs amid the war could also hit household consumption, a key growth engine.<\/span><\/p>\n \u201cInvestment, in level terms, since 2021 has run below its pre-pandemic trend and is under further pressure amid the recent pullback in public investment. This adds headwinds to our just over 6% medium-term growth assumption. Public capex (capital expenditure) is a very important component of our medium-term outlook because it addresses infrastructure gaps and crowds in private investment,\u201d Fitch added.<\/p>\n \u201cEfforts to enhance governance around capex disbursements are positive but could lead to lower infrastructure spending and GDP growth multipliers in the approaching years. Nonetheless, successful capex governance reforms, and efforts to deepen private sector involvement, could enhance the standard and ef<\/span>f<\/span>iciency of spending that might keep GDP growth multipliers high even when spending is lower.\u201d<\/span><\/p>\n LONG-TERM PROSPECTS INTACT \u201cFitch also explicitly highlighted the federal government\u2019s decisive and proactive response to global challenges, particularly the energy shock,\u201d she said at a news briefing on Tuesday. <\/span><\/p>\n The federal government\u2019s efforts to declare a state of national energy emergency and implement fuel-saving strategies \u201cdisplay agile and responsible economic management, which continues to strengthen market confidence.\u201d<\/p>\n \u201cApart from that, the Philippines continues to enjoy strong access to global capital markets supported by a diversified investor-based and sustained demand for its Republic of the Philippines issuances,\u201d she said.<\/p>\n \u201cThese are clear indicators of investors\u2019 trust within the country\u2019s long-term trajectory.\u201d<\/p>\n The Finance department largely attributed the outlook cut to the <\/span>situation within the Middle East.<\/span><\/p>\n \u201cThe revised outlook was brought on by the external geopolitical shock coming from the Middle East. The aff<\/span>irmation of our rating reflects our strong economic fundamentals and sound fiscal position,\u201d it said. \u201cThe Philippine economy stays on solid footing with a sturdy domestic market, stable economic system, and recognized reforms.\u201d<\/p>\n \u201cThe economy stays in a very good position because growth is robust, and banks are in fine condition,\u201d BSP Governor Eli M. Remolona, Jr. said in an announcement on Monday. \u201cThe BSP is closely monitoring the impact of upper oil prices and geopolitical developments, particularly the conflict within the Middle East, on inflation and the general Philippine economy.\u201d<\/p>\n The central bank\u2019s policy-setting Monetary Board will meet on Thursday (April 23), where some analysts expect a preemptive rate hike to assist keep inflation expectations in check as they expect second-round price effects from the war-driven oil shock to emerge soon.<\/p>\n<\/p><\/div>\n <\/p>\n","protected":false},"excerpt":{"rendered":" PHILIPPINE STAR\/WALTER BOLLOZOS By Justine Irish D. Tabile, Senior Reporter THE PHILIPPINES might miss its goal of achieving an \u201cA\u201d-level credit standing inside the subsequent two years as one other debt watcher cut its outlook for the country, with the Middle East war and slowing public investments putting the country\u2019s growth prospects in danger. On […]<\/p>\n","protected":false},"author":1,"featured_media":322518,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[49367,6348,17176,8016,897,3594,571],"class_list":["post-322517","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-dims","tag-goal","tag-phl","tag-prospects","tag-rating","tag-risk","tag-war"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts\/322517","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/comments?post=322517"}],"version-history":[{"count":2,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts\/322517\/revisions"}],"predecessor-version":[{"id":322520,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/posts\/322517\/revisions\/322520"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/media\/322518"}],"wp:attachment":[{"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/media?parent=322517"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/categories?post=322517"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ebiztoday.news\/index.php\/wp-json\/wp\/v2\/tags?post=322517"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
<\/b>Mr. Guinigundo added that interventions needed to cushion the economic impact of the war could affect the country\u2019s fiscal position.<\/span><\/p>\n
<\/b>Palace Press Officer Clarissa A. Castro, citing the Department of <\/span>Finance, said that the \u201cnegative\u201d outlook doesn’t mean an impend<\/span>ing sovereign rating downgrade.<\/p>\n