MANILA – Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla reiterated the central bank’s readiness to utilize its toolkit to address challenges that will have an impact on the domestic financial market.
In a statement Monday night, he said “the central bank’s exceptional and timely actions, which include aggressive monetary tightening and the previous temporary financing to the government during the pandemic, have not resulted in adverse side effects on the stability of the financial system.”
“With the Philippine banking sector being liquid and well-capitalized, the central bank stands ready to use all the tools at its disposal to preserve price stability,” he said.
The statement was issued following Fitch Ratings’ revision from negative to stable the outlook of its ‘BBB’ rating on the Philippines on Monday after noting the economy’s robust post-pandemic recovery, as well as the government’s sound economic policy framework and the country’s comfortable external payments position.
Relatively, the debt rater also affirmed its rating on the country at ‘BBB’, a notch above the minimum investment grade.
Fitch Ratings, in a commentary, said its latest rating action “reflects Fitch’s improved confidence that the Philippines is returning to strong medium-term growth after the Covid-19 pandemic, supporting sustained reductions in government debt/GDP (gross domestic product), after substantial increases in recent years.”
Growth of the domestic economy, as measured by GDP, stood at 6.4 percent in the first quarter of 2023, in line with its medium-term growth potential but the slowest since domestic output surged to 12 percent after contracting to as much as -16.9 percent in the second quarter of 2022 due to the pandemic.
Fitch forecasts a medium-term domestic output of over 6 percent, which, it said, is “considerably stronger than the ‘BBB’ median of 3 percent.”
It said growth has moderated “with the post-pandemic recovery boost fading” but noted that “ongoing reforms to the business environment and investment regulations create upside potential for growth.” (PNA)