No investment grade on RP for now — Fitch

Fitch Ratings, one of three closely-watched international ratings firms, conceded that the Philippines had achieved notable fiscal and monetary improvements under the Aquino administration but an upgrade is still far-fetched.

Head of UK-based Fitch Ratings for Asia and the Pacific Andrew Colquhoun said structural reforms that are needed to justify an investment-grade ratings have yet to happen. The country currently has a rating of BB stable.

Economic managers have been clamoring for an investment upgrade to BBB with Fitch citing the improved fiscal environment.

“In terms of the rating outlook and what would be the key rating drivers going forward, I think further a positive rating outlook would be dependent on structural reforms to raise the economic growth rate which remains not much stronger than a BB range average,” Colquhoun said.

He said the Philippines rank lower than similarly rated peers in the region like Indonesia.

Colquhoun said structural reforms like resulting to a stronger revenue collections should help lift investment activities and thus ensure long-term growth.

He said fiscal slippage through a deterioration in the fiscal balance remain “the main negative pressure” on the long-sought credit upgrade.

Colquhoun, however, credited the work done in recent years by fiscal and monetary authorities allowing the Philippines to attain a level of sustainability in growth and having effectively managed inflation pressures.

He noted ample liquidity in the economy in both foreign and local currency, its ability to provide for the future by investing in public infrastructures, for instance, has been low compared to its peers.

“The amount of investments in this economy remains relatively low compared to its rated peers,” Colquhoun said.

He noted the Philippines has an investment rate equal to only 16 percent of local output or the gross domestic product or very nearly half that of Indonesia’s investment rate of 30 percent of gross domestic product (GDP).

He added Indonesia has been growing at the rate of five percent a year in the last five years while the Philippines only managed to grow at only 4.9 percent.

Colquhoun noted that Indonesia has a higher per capita income of $3,000 or abut $1,000 more than that of the Philippines.

He stressed the stable outlook attached to the country’s BB rating indicate the likelihood of both an upward or even a downward rating adjustment.

“The stable outlook indicates that we see pressure on the rating upwards and downwards is broadly balanced over the next 12 to 18 months. Upwards structural reforms improving the investment climate leading to higher growth rate and more development, fiscal reforms that raise the fiscal revenue take and strengthening the public finances would be the key things that we see that could put an upward pressure on the rating,” Colquhoun said. CL, Daily Tribune