S&P keeps stable outlook for PH

S&P Global Ratings on Thursday maintained its stable outlook for the Philippines’ “BBB+” investment-grade rating as it sees the country’s economy recovering this year.

“The stable outlook reflects our expectation that the Philippines’ orthodox policymaking will continue to underpin its credit metrics, and that the economy will rebound strongly in 2021,” the New York-based debt watcher said in a report.

S&P projected gross domestic product (GDP) growth of 9.6 percent for the country this year. If true, it would reverse last year’s 9.5-percent contraction in 2020.

“We may raise the rating over the next two years if the economy recovers much more quickly than expected, and the government makes significant further achievements in its fiscal reform program, such that the net general government indebtedness falls below 30 percent of GDP,” it said.

The credit rating agency projects the country’s net general government debt-to-GDP ratio this year to pick up to 39.4 percent from the estimated 38.6 percent in 2020. The ratio is also seen to widen to 39.8 percent in 2022 before easing to 38.5 percent in 2023.

“We may also raise the rating if we believe the institutional settings that have contributed to the significant credit metric improvements over the past decade or so will persist,” S&P said, but warned it might lower it “if the economy suffers from a sharper and more prolonged downturn than we expect, leading to a material deterioration in the Philippines’ fiscal and debt positions.”

In an earlier statement, Finance Secretary Carlos Dominguez 3rd said the government remained committed to prudent fiscal and debt management even as it starts spending big on pandemic response measures to revive the economy and restore both business and consumer confidence.

The “government is also working with Congress on the quick passage of the Corporate Recovery and Tax Incentives for Enterprises (Create) Act. This, and the Financial Institutions Strategic Transfer (FIST) bill, which has been passed by Congress, are meant to stimulate economic activity and speed up the country’s recovery from the pandemic-driven global growth slump,” he added.

Passed on third and final reading in the Senate in November, Create is the latest version of the second package of the government’s Comprehensive Tax Reform Program.

It seeks to immediately cut the country’s corporate income tax rate from 30 percent to 20 percent for local businesses with a net taxable income of P5 million and below and total assets (excluding land) of up to P100 million; and to 25 percent for other businesses. It also aims to modernizes fiscal incentives by making them performance-based, targeted, time-bound and transparent.

The proposed measure is already up for bicameral deliberations by Congress after the House of Representatives and Senate approved their own versions.

FIST, which has been passed by both houses of Congress and is being reviewed by the Office of the President, will help banks unload souring assets. This would help ensure that the banking system remains healthy despite a potential rise in nonperforming loans. This, in turn, could result from the adverse impact of the crisis on the ability of some borrowers to pay debts on time.

Source: ManilaTimes