THE country’s economy can now heave a sigh of relief. The Philippines’s slowing growth trend, as seen from 2013 to the first three quarters of 2014, will have no negative impact on the much-celebrated credit-rating upgrades that the country has received in recent times, an international credit watcher said.
In its Asia-Pacific 2015 sovereign rating trends webcast, major credit watcher Standard & Poor’s (S&P) said the country will not be seeing any downgrade even if its growth slowed down by about 1 or 2 percentage points, alleviating the fears that the country might return to junk status because it was not able to sustain its high growth rate.
“It is quite straightforward…. This growth trajectory, despite being slower than what we saw, does not affect the ratings negatively,” S&P Senior Director Kim Eng Tan responded, when asked if the country is poised for a downgrade with its slowing growth.
Kim, however, warned that if the government institutes structural changes that will cause the fiscal and economic stability to falter, then that could trigger a downgrade.
Tan also bared that S&P expects growth to be within the 6-percent territory this year and the next, and is seen to grow “even below that” in 2017.
These rough estimates of S&P are all below the government’s targets set for each year, and are contradictory to the projected path of the economic managers of the country, which is geared on an upward trend.
The Philippine economy has completed the first ascent to the investment-grade ladder in 2013, when the country has been hitting a growth rate of about 7 percent—except on the fourth quarter of that year, when the economic gowth fell to about 6 percent, owing to the disruptions caused by Supertyphoon Yolanda (international code name Haiyan).
It was during that year when all three major credit watchers—Moody’s Investors Service, Fitch Ratings and S&P—lifted the country from the junk status.
This year S&P and Moody’s gave the country another upgrade amid the lower growth rates.
The Philippine economy posted a slower-than-expected growth rate at 5.3 percent in the third quarter of 2014, owing to the slump in agricultural production and the government’s inability to disburse funds.
But despite the lower growth, the Bangko Sentral said the country is seen to bounce back in the fourth quarter of the year as pointed by early indicators.
In its fourth-quarter full inflation report, the BSP said the prospects for domestic demand remain firm, as seen in strong private spending, recovery of capital formation, external trade strengthening of the global manufacturing industry, higher vehicle sales and buoyant business and consumer sentiment, all in the last quarter of 2014.