By Luisa Maria Jacinta C. Jocson, Reporter
THE PHILIPPINES’ credit standing could also be upgraded if the economic system grows sooner than anticipated, S&P International Scores mentioned.
“On the upside for us, the Philippines’ rankings might be raised if the financial restoration is even sooner than what we at the moment challenge and if the federal government achieves even sooner fiscal consolidation,” YeeFarn Phua, director at S&P International Scores, mentioned in a webinar on Tuesday.
The Philippines at the moment holds a “BBB+” ranking with a “secure” outlook from the debt watcher.
“The outlook on the sovereign rankings stays secure. Mainly, this secure outlook displays our expectation that the economic system will proceed to develop healthily,” Mr. Phua mentioned.
The credit score rater expects Philippine gross home product (GDP) progress to common 5.8% this 12 months and 6.1% in 2025. These are each under the federal government’s 6-7% and 6.5-7.5% progress targets for this 12 months and subsequent, respectively.
Within the second quarter of the 12 months, Philippine GDP grew by 6.3%, the quickest since 6.4% within the first quarter of 2023. This introduced the primary semester progress to six%.
Mr. Phua mentioned the outlook can be “balanced by the truth that we imagine fiscal efficiency may even enhance over the following 24 months.”
The Nationwide Authorities’s (NG) funds deficit widened by 7.2% to P642.8 billion within the January-to-July interval, newest information from the Treasury confirmed.
Mr. Phua additionally flagged potential dangers, similar to an financial slowdown, that would hinder a credit score improve for the Philippines.
“On the draw back, nonetheless, we imagine that if financial restoration had been to weaken, resulting in the long-term progress charges under its friends, this may even result in an related weakening of the federal government’s fiscal and debt positions,” he mentioned.
He additionally famous dangers to exterior settings, similar to the present account deficit.
“If we see that the (present account deficit) begins to get persistently giant, this can truly result in a structural weakening of the Philippines’ exterior stability sheet. And we imagine this might exert downward stress on the rankings.”
Within the second quarter, the present account deficit reached $5.1 billion, which accounts for 4.6% of GDP. The BSP tasks a $4.7-billion present account deficit for 2024, equal to 1% of GDP.
In the meantime, Mr. Phua famous that S&P International’s lower-than-expected progress forecasts for the Philippines are on account of still-elevated rates of interest.
“Thus far, the BSP has solely reduce as soon as. Due to this fact, our expectation is that we anticipate the reducing section to be performed regularly over the following 12 months or so. And subsequently, financial coverage will nonetheless stay tighter than regular for some time extra,” he mentioned.
Final month, the Financial Board delivered a 25-basis-point (bp) charge reduce and introduced the important thing charge to six.25% from the over 17-year excessive of 6.5%. This was the primary time the central financial institution reduce charges since November 2020.
Previous to this, the central financial institution raised borrowing prices by a cumulative 450 bps from Could 2022 to October 2023 to tame inflation.
“On the identical time, we’re additionally seeing the consumption and investments are additionally displaying slowing momentum than common,” Mr. Phua mentioned.
“We imagine this might final for some extra time, given because the central financial institution strikes are typically a bit extra lengthy and variable lags earlier than they’ll begin to influence the actual economic system.”
