Global Credit Raters See Continued PHL Growth

MANILA, Philippines - Standard and Poor’s (S&P) Global Ratings said the underlying demographic trends in the Philippines is expected to drive growth despite the changing of the guard in Malacañang next month.

In a report, S&P retained its gross domestic product (GDP) growth forecast for the Philippines at six percent this year and 6.3 percent next year.

“With economic policy unlikely to change significantly with the incoming president, underlying demographic trends will continue to drive growth,” S&P said.

S&P said a growing and educated middle class would continue to be absorbed by a combination of overseas employment and a booming outsourcing industry.

This, it explained, would drive consumption and investment even as external demand remains weak.

The country’s GDP growth slowed down to 5.8 percent last year from 6.1 percent in 2014 due to weak global demand and low government spending.

Economic managers expect a GDP growth of between 6.8 and 7.8 percent this year.

The international rating agency said the eight-point economic agenda supports the reforms adopted by the outgoing administration of President Aquino.

“From an economic policy standpoint, his statements since the election have so far focused on maintaining the previous administration’s infrastructure program via public private partnership, as well as endeavoring to revise constitutional restrictions on foreign investment,” S&P said.

The debt watcher noted the peso and the stock markets have recovered after weakening substantially leading to the May 9 presidential and national elections.

Likewise, the amount of money sent home by Filipinos working and living abroad continued to hold despite soft oil prices that would take its toll on Filipinos in the Middle East.

Inflation averaged 1.1 percent in the first four months, way below the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP).

S&P sees inflation rising to 2.5 percent this year and to 3.3 percent next year after easing to 1.4 percent last year from 4.1 percent in 2014 due to stable food prices and cheaper utility rates arising from soft oil prices.

S&P together with Moody’s Investors Service, Nice Ratings, and R&I have assigned a one-notch above investment grade rating on the country while Japan Credit Rating Agency has assigned a credit rating of two notches above investment grade.

Fitch Ratings, on the other hand, has kept the country’s credit rating at minimum investment grade but has assigned a positive outlook in the Philippines.