MANILA – Department of Finance (DOF) Secretary Benjamin Diokno said the Fitch Ratings' improved outlook for the Philippines reflects the country's strong macroeconomic fundamentals.
Diokno made the statement after the Fitch rating agency on Monday affirmed the country's ‘BBB’ credit rating and upgraded its outlook from ‘negative’ to ‘stable.’
A rating of ‘BBB’ sits above the minimum investment grade and suggests that expectations of default risk are low.
It also indicates the ability of the country to meet its financial commitments.
“The improved outlook for the Philippines to ‘stable’ is a testament to the country’s robust macroeconomic fundamentals, as evidenced by the economy’s strong growth performance in 2022 at 7.6 percent and 6.4 percent in the first quarter of 2023,” Diokno said.
The report said the revision of the outlook reflects Fitch’s improved confidence in the Philippines’ return to strong medium-term growth after the pandemic, sustained reductions in the country’s debt-to-gross domestic product (GDP) ratio, and the country’s sound economic policy framework.
Fitch projects the country's gross domestic product (GDP) to reach above 6 percent over the medium term.
“Fitch’s latest rating action reflects the strong economic activity which can be fostered by the improved investment climate in the country. The country’s growth is further supported by the steady improvement of our labor and employment conditions,” Diokno said.
Diokno assured that the Finance department remains committed to maintaining the stability of the country’s macroeconomic fundamentals through prudent fiscal management.
“We will continue to rely on structural reforms that will broaden opportunities and enhance the country’s productivity, particularly through higher investments in infrastructure. The full implementation of the six-year Medium-Term Fiscal Framework will support these investments while promoting fiscal sustainability,” he said.
The proposed tax revenue measures under the framework include Package 4 of the Comprehensive Tax Reform Program or the Passive Income and Financial Intermediary Taxation Act, value-added tax (VAT) on digital service providers, excise taxes on single-use plastics, and excise taxes on pre-mixed alcohol.
These measures are currently being deliberated and discussed at the House of Representatives and Senate, and are expected to be implemented starting 2024.
To support the reforms in the Medium-Term Fiscal Framework, the Development Budget Coordination Committee (DBCC) earlier announced additional tax measures such as the imposition of higher excise taxes on sweetened beverages, rationalization of the motor vehicle road user’s tax, and reforms to the mining fiscal regime.
Diokno said the government is also pursuing expenditure reforms, such as the national government rightsizing program and reforms to the Military and Uniformed Personnel (MUP) pension system.
With the reconstitution of the Economic Development Group (EDG), Diokno said the government will ensure that economic growth is maintained by fast-tracking the implementation of infrastructure projects and mitigating the impact of global uncertainties. (PNA)