Sustainability flagged by Fitch

A VISITING Fitch Ratings team flagged the sustainability of the country’s over 7% growth as a concern and left without a clear signal as to whether the latest annual review will yield another upgrade anytime soon, policy makers said over the weekend.

The Fitch team was in Manila last month for a yearly assessment, which came almost a year after the debt watcher raised the Philippines to investment grade.

The country is currently rated ‘BBB-” by Fitch with a ‘stable’ outlook.

Asked about the possibility of getting an upgrade in the outlook to ‘positive’ — a prelude to progressing to a higher investment grade rating — BSP Governor Amando M. Tetangco, Jr. said: “That remains to be seen.”

The central bank chief, however, pointed out that Fitch officials “recognized the substantial progress that has been achieved by the country.”

“Our meeting went well. Their question was about the sustainability of this good economic performance,” Mr. Tetangco said in an interview Friday night.

In a text message to BusinessWorld, National Treasurer Rosalia V. de Leon yesterday said the Fitch team also wanted to know the “impact of the Fed’s tapering on the economy and the government’s funding options,” but did not elaborate.

The US central bank’s reduction of its stimulus program has led to outflows from emerging markets, hurting their current accounts and raising the possibility of monetary policy tightening to defend their currencies.

But Philippine policy makers said Fitch should’ve need little convincing that the economy wouldn’t lose steam, adding that the current account will weather global headwinds.

The Philippine economy grew by 7.2% in 2013, exceeding the government’s 6-7% goal, despite disasters that hit late in the year.

This year’s target is a higher 6.5-7.5%.

“On the monetary policy side, we said ‘we believe it (the country’s economic performance) is sustainable’,” Mr. Tetangco said.

“We also said the same on the stability of the banking system and our external payments position,” he added.

Fitch was the first of the three major debt watchers to raise the country’s sovereign rating one notch to investment grade in March last year.

Standard & Poor’s (S&P) followed suit in May with an identical ‘BBB-’, also with a stable outlook. Moody’s Investors Service was the last to do so in October with a ‘Baa3’ and a positive outlook.

Fitch, S&P and Moody’s representatives stage regular visits as part of annual evaluations of latest socioeconomic developments in the country.

The Fitch team that conducted the review prior to last year’s upgrade was led by Andrew Colquhoun, Fitch’s Asia-Pacific sovereign ratings head, and Philip McNicholas, Fitch’s sovereign ratings director.