Fitch Ratings maintains 'BBB' credit rating, stable outlook for PH

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Metro Manila (CNN Philippines, January 11) — Fitch Ratings has kept its 'BBB' credit rating for the Philippines and 'stable' outlook for its economy as the country continues to grapple with the coronavirus pandemic.

In a statement, the international credit rating agency said the affirmation "balances modest government debt levels relative to peers, robust external buffers and still-strong medium-term growth prospects, notwithstanding the deep pandemic-induced economic contraction, against relatively low per capita income levels and indicators of governance and human development compared to peers."

Fitch Ratings further noted that the government's efforts to curb the spread of the virus gravely impacted private consumption and investment, effectively pulling down economic output by 10% annually from January to September last year. The economy contracted by another 11.5% in the third quarter of 2020.

Quarantine restrictions, albeit in different levels, are still in place nationwide, with most parts of the country still under the more relaxed modified general community quarantine. This allows more business to operate and at higher maximum capacities.

With this, the rating agency expects the country's gross domestic output to shrink by 8.5% full-year, taking into account relative improved activity indicators in the last three months of 2020.

Fitch Ratings projects economic activity will continue to bounce back this year, forecasting GDP growths of 6.9% in 2021 and 8% in 2022, citing the downtrend in daily COVID-19 cases recorded in the past months.

However, health officials and experts have earlier warned of a possible surge in cases following the holiday season, with adherence to minimum public health standards said to have decreased during the period.

The international debt watcher likewise cited government efforts to secure COVID-19 vaccine doses through multilateral talks, noting a delay poses down-side risks to their growth forecasts while an effective rollout might lead to an economic recovery much quicker than expected.

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Meanwhile, Fitch Ratings expects the country's debt-to-GDP ratio to rise to 48% in 2020, with the pandemic weakening the Philippines' robust public finances. This will even peak at around 55% in 2022 versus a projected 'BBB' 56.6% median, it further projected.

RELATED: Coronavirus response-related borrowings raise govt. debt to ₱10.13T in November

Last year, the Finance Department assured it will keep national debt at half the size of the Philippine economy, banking on the country's strong position prior to the pandemic.

Finance Assistant Secretary Paola Alvarez also told CNN Philippines' The Exchange this January the country will be utilizing "low-cost, long-term" loans from multilateral development partners to help fund vaccination efforts.