Fitch Ratings’ outlook change on Philippines’ rating from stable to negative is “a useful heads up” for the government to work hard for the economy’s rebound, executives of the First Metro Investment Corporation (FMIC) said.
In a virtual briefing on Tuesday, FMIC president Jose Patricio Dumlao said they look at Fitch Ratings’ decision “constructively” and consider it as “more of a reminder that the economic recovery requires hard work.”
“More than a negative warning, it’s also a useful heads up about the many pitfalls that line the path to growth in the myriad of the country’s existing economic strengths to overcome these,” he said.
Dumlao said since the adjustment covers the outlook and not the credit rating, the country has 18 to 24 months to show how the economy fares.
“We hope to see the economy bounce back during that period,” he said.
FMIC research head and first vice president Cristina Ulang said “there is a lot of conservatism and guidance” on the Fitch Ratings’ decision.
“But the market is inspired by the guidance and you’ll see that in what our traders have told me in the trading room, our fixed income market and the equities market,” she said during the same event.
Initially, there were some negative reactions after the news came out, Ulang said, “but the positions in the belly of the yield curve were reinstated, meaning buying.”
She said market confidence is back, thus the flat performance of the Philippine Stock Exchange index (PSEi) instead of sustained decline.
University of Asia and the Pacific (UA&P) economist Dr. Victor Abola said Fitch Ratings “has a record of seeing negatives in the Philippines” compared to Moody’s Investors Service and S&P Global Ratings.
To date, Fitch Ratings rating on the Philippines is BBB with negative outlook, the lowest investment grade level of the company, while it is at Baa2 with stable outlook, a notch above minimum investment grade, for Moody’s, and BBB+ with stable outlook, the highest among the three levels of BBB-level investment grade, for S&P Global Ratings.
“I think they’re giving a lot of weight to the negative performance in Q1 (first quarter),” Abola said.
The domestic economy posted a 4.2-percent contraction in the first quarter of this year, better than the previous quarter’s -8.3 percent print.
Authorities partly attributed the contraction to the impact of the two-week enhanced community quarantine (ECQ) implemented in the National Capital Region and four nearby provinces namely Bulacan, Rizal, Cavite and Laguna, collectively called NCR Plus bubble, starting March 29.
Abola believes that the economy will post better growth figures starting in the second quarter due to improvement in the manufacturing sector, as well as exports and imports.
Source: Philippines News Agency
