PH Credit Rating Downgrade ‘Highly Unlikely’: BSP Chief

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno considers as “highly unlikely” any ratings downgrade for the Philippines after the domestic economy posted another growth contraction in the second quarter of 2020.

“The sharp fall in Q2 GDP does not pose a danger to the Philippines strong macroeconomic fundamentals: relatively low debt-to-GDP ratio, one of the highest tax effort in the region, benign inflation and well-managed inflation expectations, strong peso, hefty gross international reserves, well-capitalized banking system with low non-performing loans,” he said in a text message to journalists Friday.

On Thursday, the Philippine Statistics Authority (PSA) reported that gross domestic product (GPD) posted a -16.5 percent output in the second quarter of the year, the weakest since the 1981 series of reporting.

This follows the revision of the first quarter output from -0.2 percent to -0.7 percent.

Diokno noted that even as Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings downgraded 82 sovereigns and revised to negative the outlooks of 104 sovereigns in the first half of this year, the debt raters affirmed their ratings on the Philippines.

Last May, Fitch Ratings affirmed its BBB rating on the country but change the outlook from positive to stable while S&P Global Ratings affirmed its BBB+ rating with stable outlook and Moody’s Investors Service affirmed its Baa2 rating, with a stable outlook.

The following month, Japan Credit Rating Agency (JCRA) upgraded its investment-grade rating on the Philippines from BBB+ to A-, with a stable outlook.

Amid the Philippine economy’s two consecutive quarters of contraction, Diokno said “economic managers view the economy’s plunge in the second quarter as temporary resulting from the strict and comprehensive lockdown during the period owing to the coronavirus pandemic.”

He also said, “the recovery process is on its way and we expect a strong rebound of 6.5-7.5 percent in 2021.”

“We should look beyond the current crisis. We should craft a strong economic recovery program accompanied by more structural reforms that would allow the Philippines to rebuild better for the future,” he added.

Economic managers, during the meeting of the inter-agency Development Budget Coordination Committee last July 28, revised the government’s GDP target this year from a 2-3.4 percent contraction to -5.5 percent level while next year’s target was revised from growth of 8-9 percent to 6.5-7.5 percent.

The 2022 GDP target is also between a range of 6.5-7.5 percent. (PNA)