Connect with us

Hi, what are you looking for?

Top Stories

Editor's Pick

Fitch cites potential credit rating cut

PIKISUPERSTAR-FREEPIK

By Jenina P. Ibanez, Senior Reporter

Rising public debt could lead to a credit rating downgrade for the Philippines in the next few years, Fitch Ratings said.

The rating company would consider the country’s public debt-to-gross domestic product (GDP) ratio in the medium term, especially as finances in the Asia Pacific improve, it said in a note on Friday.

“Rating downgrades could occur for countries such as India, Japan and the Philippines, which are on negative outlook,” it said.

Outstanding government debt ballooned to P10.2 trillion last year from P8.2 trillion in 2019 as the state ran big deficits to battle a coronavirus pandemic.

President Rodrigo R. Duterte’s 2022 record spending plan, up by 11.5% to P5.02 trillion pesos from this year’s budget, is his last before his six-year term ends in June 2022.

The likelihood of authorities stabilizing or cutting the debt-to-GDP ratio in both India and the Philippines is waning, Fitch Ratings said.

It noted that higher public debt ratios in both economies had been caused by a higher drop in output and increased economic scarring even though they provided less fiscal support.

In July, Fitch Ratings changed its outlook for the Philippines to negative from stable as it cited increasing risks to the country’s credit profile from the pandemic.

The country’s debt-to-GDP ratio was 63.1% as of September, the highest in 16 years, government data showed.

The credit rating company said withdrawing pandemic-related policy support could be difficult especially in countries such as the Philippines, where low vaccination rates make the country vulnerable to more disruption.

It expects the course of countries’ policy normalization to influence sovereign ratings, especially for those with a negative outlook.

Central banks in the Asia-Pacific region may find it hard to withdraw extra liquidity they provided during the crisis, including the Philippines’ direct deficit financing, Fitch Ratings said.

“This tactic freed up resources for relief measures, but could weaken credit profiles if it results in increased government interference in monetary policy and fiscal dominance,” it added.

The lack of further fiscal and investment reforms under a new government next year could hasten a credit downgrade, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.

“This would signal a wrong message to potential and likely investors interested in the Philippines,” he said in a Viber message.

The next administration should deal with the impact of the pandemic to ensure a stable recovery, he added.

Slower than expected economic growth could lead to a credit downgrade because it would affect the country’s ability to pay its debt, Asian Institute of Management economist John Paolo R. Rivera said in a Viber message.

Pandemic management would also show if it could reopen the economy and improve employment and output, which would guarantee debt payment, he added.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

Editor's Pick

The Board of Investments (BoI) has cleared Sinoma Energy Conservation (Cebu) Waste Heat Recovery Co. Inc. to serve as the operator of a 4.5-megawatt...

Forex

At a time when the world is battling to get through the dreaded coronavirus pandemic, protective face masks have come out to be the...

Editor's Pick

BEWARE the “lessons of history” as drawn by charlatans, ignoramuses, or tyrants, for they will be daft, wrong, and possibly disastrous. The self-serving amateur...

Editor's Pick

The world’s food-import bill is set to jump even more than expected to a record this year, increasing the threat of hunger, especially in...

Disclaimer: SecretsOfRichDads.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice.
The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Secrets Of Richdads. All Rights Reserved.