MALACAÑANG on Thursday downplayed concerns raised by global credit ratings agency Standard & Poor’s the country won’t likely have a rating upgrade in the next two years, citing President Rodrigo Duterte’s unpredictability and uncertainty over his domestic and foreign policies.
“On Standard & Poor’s assessment to maintain the country’s BBB investment grade ratings, we welcome S&P’s decision as it gives government greater resolve to make our economy’s growth robust, sustainable, and inclusive,” Communications Secretary Martin Andanar told a Palace briefing.
But Andanar stressed the President’s war on drugs was not the reason for any economic slowdown.
“Any hiccups to slow down growth will depend on the overall performance of global economy,” he said.
“The fundamentals of the economy are solid and strong. We are the fastest growing economy in the second quarter of 2016 and we shall seize this economic momentum to bring about inclusive development to our people.”
Trade Secretary Ramon Lopez, meanwhile, defended Duterte from views of critics that his rising unpredictability was bringing a lot of risks to the economy.
“The President is just determined to help the Filipino people. Ensure peace, security, illegal drug-free — that is the promise of President Duterte during the ASEAN. He’s just after our welfare,” he said.
He added: “There are lots of benefits of a safe community, especially the way we look at it in the business sector. To them, this is a much-improved, much stronger Philippine Republic.”
On Wednesday, global debt watcher Standard & Poor’s affirmed the “BBB” investment-grade credit rating it gave to the Philippines on May 8, 2014 with a stable outlook.
“In addition, we affirmed our ‘axA/axA-2’ Asean regional scale ratings on the Philippines,” S&P Global Ratings said in a statement.
“The ratings on the Philippines reflect our assessment of its lower middle-income economy and rising uncertainties surrounding the stability, predictability and accountability of its new government,” S&P said.
“Offsetting these weaknesses is the Philippines’ strong external position, which features rising foreign exchange reserves and low and declining external debt,” it said.
S&P said President Duterte’s strong focus on improving “law and order,” which allegedly resulted in many instances of extrajudicial killings since he came to power, could undermine respect for the rule of law and human rights.
“When combined with the president’s policy pronouncements elsewhere on foreign policy and national security, we believe the stability and predictability of policymaking has diminished somewhat,” S&P said.
It said uncertain conditions in export markets and inadequate infrastructure mainly in transportation and energy were the main downside risks to growth outlook for the Philippines.
S&P said without the closure of infrastructure gaps and improvements in the business climate through greater political stability and regulatory reforms, the Philippines might not achieve a middle-income status in 2017, where per capita GDP exceeds $3,000.
The credit rating agency said a higher rating was unlikely over the two-year ratings horizon.
But it might raise the ratings if continued fiscal improvements under the new administration would boost investment and economic growth prospects, or if improvements in the policy environment could lead to a better assessment of institutional and governance effectiveness.
Other factors that could mitigate risks associated with the Philippines’ international liabilities were a very low reliance on external savings by its bank and company sectors and the low and mainly long-term nature of the government’s external borrowings.