The Philippines will likely attract more foreign direct investments (FDI) inflows after Fitch Ratings affirmed its ‘BBB’ investment grade rating with stable outlook for the country.
Rizal Commercial Banking Corporation chief economist Michael Ricafort said the latest affirmation of the country’s credit rating defies “the adverse economic effects of the Covid-19 pandemic that led to downgrades in the outlook and credit ratings of other countries around the world.”
Ricafort said this development, “signals resilience and would also encourage the entry of more FDIs, given the country’s improved economic and credit fundamentals, “thereby increasing international investor confidence /sentiment in the country. . .”
“The improved economic and credit fundamentals of the Philippines in recent years, amid attractive demographics, with the 12th largest population in the world at about 110 million, would make the Philippines a compelling investment destination and additional hedge for the global supply chain of various global/multinational companies looking for increased growth/sales, thereby making the country as an attractive production and marketing hub, as well as an attractive entry point to the other free trade agreement (FTA) partner countries of the Philippines,” he added.
Along with the improvement of the government’s fiscal performance, Ricafort said he expects the entry into the country of “more/bigger roster of international investments and international credit/loans at much lower cost and with better terms, in view of the need to finance Covid-19 programs and other economic stimulus measures needed to help sustain the economic recovery, going forward.”
Fitch Ratings’ latest rate decision on the Philippines comes after it affirmed the country’s ‘BBB’ rating but changed the outlook from positive to stable in May 2020.
S&P Global Ratings also affirmed its BBB+ rating with stable outlook on the country, while Moody’s Investors Service affirmed its own Baa2 rating with a stable outlook for the Philippines.
In June last year, Japan Credit Rating Agency (JCRA) upgraded its investment-grade rating on the Philippines from BBB+ to A-, with a stable outlook.
Fitch Ratings said its latest rate decision on the country “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.”
It said the pandemic’s impact on the domestic economy is greater than earlier expectations “due to the domestic infection rate and government policy measures to curb the spread of the virus.”