Recent Posts

Breaking News

Fitch flags PH’s eroding risk buffers due to pandemic

One of the three major international credit rating agencies said the Philippines’ economic woes are beginning to take a heavier toll on its strong risk buffers as coronavirus cases continue to surge in the country.

Sagarika Chandra, Fitch Ratings associate director, said yesterday that government debt is expected to significantly increase this year amid mounting pandemic-related spending and a deepening economic contraction.

 Chandra cited that the country’s low general government debt ratio of 34.1 percent of gross domestic product (GDP) last year will rise to around 48 percent in 2020.

But despite a sharp acceleration, Chandra still noted that the projected general government debt ratio, although a substantial rise from its level in 2019, remains below the peer median of 51.7 percent.

 “There is still room to accommodate some deterioration in the fiscal outlook,” Chandra said in a research note.

She, meanwhile, said the country’s depressed economy has worsened as Fitch now expects GDP contraction to be more than an earlier forecast of 4.0 percent.

Chandra explained Fitch’s estimated deeper economic decline was due to the two-week reimposition of strict lockdown measures over Metro Manila and nearly provinces this month.

 “Downside risks to our economic projections for the Philippines, noted in our last rating review in May 2020… are materialising due to the country’s difficulty in containing the virus,” Chandra said.

 “Our forecast that the economy will contract by 4 percent in 2020 now appears optimistic and is likely to be revised down,” she added.

Fitch earlier affirmed the country’s investment grade credit ratings at “BBB,” but revised the outlook to “stable,” from “positive.” But the debt-watcher noted that the current status is subject to risks.

“If the economy continues to contract and fails to recover as fast as the authorities expect; indeed, if the recovery stalls, there may be pressure for even more fiscal stimulus,” Chandra said.

For this reason, she said that Fitch continues to assess the Duterte administration’s ability to adhere to its fiscal consolidation plans in the medium-term framework.

“We will also assess the extent to which the crisis may affect the Philippines’ strong medium-term growth potential, which has supported the country’s rating,” Chandra said.


Source: Manila Bulletin (https://mb.com.ph/2020/08/11/fitch-flags-phs-eroding-risk-buffers-due-to-pandemic/?utm_source=rss&utm_medium=rss&utm_campaign=fitch-flags-phs-eroding-risk-buffers-due-to-pandemic)

No comments