Fitch Ratings yesterday upgraded the Philippines’ sovereign credit rating, citing the nation’s strong economic performance and policies, and pointing to no immediate effects on investment from Philippine President Rodrigo Duterte’s deadly war on drugs.
Fitch, the first credit rating agency to raise the Philippines’ credit rating to investment grade in 2013, said that investor confidence remains strong, as indicated by solid domestic demand and inflows of foreign direct investment.
“As such, there is no evidence so far that incidents of violence associated with the administration’s campaign against the illegal drug trade have undermined investor confidence,” it said in a statement.
Its upgrade to “BBB” from “BBB-” aligns the agency’s ratings on the Southeast Asian nation with those of peers Standard & Poor’s (S&P) and Moody’s Investor Services.
Although the Philippines is among the fastest growing economies in Asia, some analysts had flagged risks Duterte’s war on drugs could pose to investment.
The Philippines has drawn international criticism for the killing of about 3,900 people in police anti-drugs operations since Duterte took power in June last year, but the police deny allegations by human rights advocates that many of the killings were executions.
A statement from Duterte’s office yesterday said the upgrade was an affirmation of the administration’s fight against crime and corruption.
Fitch forecast real GDP growth of 6.8 percent for the Philippines next year and in 2019, and said it would maintain its place among the fastest-growing economies in the Asia-Pacific region.
Fitch said it expects higher infrastructure spending under the government’s public investment program to support continued robust growth over the medium term.
Duterte has pledged to modernize the nation’s airports, roads, railways and ports through a six-year, US$180 billion “Build, Build, Build” initiative to attract much-needed foreign direct investment and lift economic growth.
Philippine Secretary of Finance Carlos Dominguez said he expects more positive rating actions for the Philippines over the next two years.
“Our macroeconomic fundamentals are on par with, if not better than, those of higher-rated sovereigns and continue to improve,” he said in a statement.
Investors’ reaction was muted, with the peso slightly firmer against the US dollar following Fitch’s announcement.
The peso opened at 50.42 and rose further to 50.31 from Friday’s close of 50.50.
The Philippines’ benchmark stock index yesterday was down 0.2 percent at 3:12am GMT.
Fitch in 2013 upgraded the Philippines by one notch to “BBB-,” citing Manila’s efforts to achieve fiscal sustainability, curb corruption and increase infrastructure spending.
The move to investment grade was followed by S&P less than two months later, lifting the Philippines’ ratings to “BBB-” from “BB+.”
Moody’s followed suit, upgrading the Philippines by one notch to “Baa3” from “Ba1.”
Moody’s and S&P have since raised their respective ratings to “Baa2” and “BBB.”
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