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Fitch confirms economy’s strength

Bangko Sentral Governor Amando M. Tetangco Jr. said Fitch Ratings decision on Wednesday to affirm its ratings on the country attests to the strength and resiliency of the domestic economy.

Fitch Ratings has affirmed its investment grade ‘BBB-‘ rating, with Positive outlook, on the Philippines after citing the “continued strong and consistent growth performance, a robust net external creditor position and government debt levels that are lower than median peers in the ‘BBB’ rating category.”

It explained that the domestic output’s performance is “a rating strength” after noting the 6.8 percent expansion in 2016, higher than the previous year’s 5.9 percent.

This output, it said, is “supported by continued strong growth in private consumption spending and investment.”

Fitch also noted the strong external payments position of the country, boosted by the current account surpluses that were achieved since 2003.

In recent years, the country’s current account surplus, although still driven by remittances from overseas Filipinos, tourism receipts and the business process outsourcing sectors, has declined in line with the rise in imports, which in turn is needed by the expanding economy.
   
As of end-2016, the country’s current account surplus amounted to USD6601 million, or about 0.2 percent of gross domestic product.
   
The country’s gross international reserves, meanwhile reached a record-high of USD81.4 billion as of last February. The current level of foreign reserves of the Philippines is enough to cover nine months’ worth of imports.
   
Fiscal position of the country is another plus, the credit rater said, noting that the Duterte administration’s 10-point agenda ensures continued and higher spending on necessary infrastructure and basic services, among others.
   
Fitch Ratings said combination of these factors are seen to further cement the economy’s strong growth, with the expansion forecast for 2017 at 6.8 percent while it is 6.7 percent for 2018.
   
Its forecast for the country this year is within the government’s 6.5-7.5 percent target while the 2018 GDP target is seven to eight percent.
   
In 2016, the economy grew by 6.8 percent.
   
The debt rater also said monetary and exchange rate policies in the country “are effective” and the central bank “has been able to maintain inflation at modest levels.”
   
”The foreign exchange managed-float regime allows the peso to act as a cushion against external shocks, as evidenced by the downward adjustment in the currency following portfolio outflows in 2016,” it said.
   
Fitch said the upcoming change in the BSP’s leadership “will be important in the context of policy stability and credibility.” Tetangco will end his two six-year terms on July 2.
   
Tetangco said all these positive developments “did not happen by chance.”
   
”The country’s economic gains have been built from deeply rooted structural and sound policy reforms implemented over the years,” he said.