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FitchAffirmsthePhilippinesat'BBB'OutlookPositive
FitchRatingsHongKong08April2016:FitchRatingshasaffirmedthePhilippines'LongTermForeign
andLocalCurrencyIssuerDefaultRatings(IDRs)at'BBB'and'BBB'respectively,andtheOutlook
remainsPositive.TheissueratingsonthePhilippines'sseniorunsecuredforeignandlocalcurrency
bondsarealsoaffirmedat'BBB'and'BBB'respectively.TheCountryCeilingisaffirmedat'BBB'andthe
ShortTermForeignCurrencyIDRat'F3'.
KEYRATINGDRIVERS
TheaffirmationofPhilippines'sovereignratingsreflectsthefollowingfactors:
Externalfinancesarearatingstrength.ThePhilippineshasbeenrunningcurrentaccountsurpluses
since2003,withanaverageofaround3%ofGDPfortheperiod20112015.Thishasbeenhelpedby
thesteadyremittanceinflowandhasledtoabuildupinforeignexchangereserves.Thecountry'snet
externalcreditorpositionatnearly14%ofGDPcomparestothemediannetdebtorpositionof4.6%of
GDPamongpeersinthe'BBB'ratingcategory.
Governmentdebtanddeficitlevelshavebeendecliningandbytheendof2015,generalgovernment
debttoGDPisestimatedatabout36%ofGDPcomparedwith43%ofGDPattheendof2010.Fiscal
deficitshavenarrowedtojust0.9%ofGDPin2015from3.5%ofGDPin2010.Fitchestimatesthatthe
fiscaldeficitwouldremainunder2%ofGDPover20162017.However,theagencycontinuestoviewlow
governmentrevenues,whichreducesthesovereign'sabilitytocontainfiscalbalancesintheeventofa
shock,asaweaknessinthePhilippines'fiscalprofile.Fitchestimatesgeneralgovernmentrevenuewas
closeto20%ofGDPin2015,whichislowerthanthe'BBB'median's28.6%and'A'median's34.7%.
ThePhilippines'lowaverageincomeandlevelofdevelopmentisacreditweakness.ThePhilippines'
GDPpercapitain2015wasUSD2,860,whichislowerthanthe'BBB'medianofUSD9,253.This
measurehoweverdoesnotcapturethesignificantsupporttolivingstandardsprovidedbyoverseas
Filipinoremittances.In2014,thecountryfellinthe37thpercentileonUN'sHumanDevelopmentIndex,
comparedwiththe63rdpercentileforthe'BBB'median.
Governancestandardshavecontinuedtostrengthensince2010underthecurrentadministrationof
PresidentBenignoAquinoIII,especiallygovernmenteffectivenessandpoliticalstabilityasmeasuredby
WorldBank'sgovernancemetrics.Presidentialelectionson9May2016willseeachangeof
administrationasMr.Aquinoisconstitutionallybarredfromseekingreelection.Itremainstobeseen
whetherthenextadministrationwillpreserveorextendtheimprovementsinthisareaseenunderMr.
Aquino'sstewardship.
Macroeconomicgrowthperformanceremainsfavourable.AveragerealGDPgrowthin20112015was
5.9%,whichisfarabovethe'BBB'medianof3.3%andthe'A'medianof3.2%.Fitchexpectsthe
Philippines'growthmomentumtocontinueandexpectsrealGDPgrowthtoaveragearound6%over
201617.
LiquiditylevelsinthePhilippines'bankingsectorareample,capitalisationisstrongandloanloss
reserveshaverisen.ThebankingsectorhasalreadyimplementedBaselIIIminimumcapitalstandardsin
fullatthebeginningof2014.Loangrowthslowedtonearly14%in2015fromcloseto19%in2014.
Activesupervisionandregulationbyariskawarecentralbank,whichhasprogressivelystrengthened
riskmanagementrequirementsforthebanksovertheyears,havehelpedtotempertherisksfromhigh
https://www.fitchratings.com/site/fitchhome/pressrelease?id=1002193 1/3
4/8/2016 PressRelease
creditgrowth.
RATINGSENSITIVITIES
Themainfactorsthatindividuallyorcollectivelymightleadtopositiveratingactionare:
Furtherevidencethatimprovementingovernancestandardscanbesustainedfollowingachangein
governmentafterelections.
Furtherbroadeningofthegovernment'srevenuebasethatlendsgreaterstabilitytogovernment
finances.
Continuedstronggrowthwithouttheemergenceofimbalances.
TheratingOutlooksarePositive.HenceFitchdoesnotanticipateamaterialprobabilityofnegativeaction
overtheforecastperiod.However,themainfactorsthatcouldseetheratingsreverttoStableOutlook
are:
Deteriorationingovernancestandardsand/orreversalinreformsimplementedundertheAquino
administrationcouldbecreditnegative.
Instabilityinthefinancialsystem,possiblytriggeredbyasustainedperiodofexcessivecreditgrowth
couldbecreditnegative
KEYASSUMPTIONS
GlobaleconomicconditionsdevelopinlinewithFitch'slatestGlobalEconomicOutlook.
Contact:
PrimaryAnalyst
SagarikaChandra
AssociateDirector
+85222639921
Fitch(HongKong)Limited
19/FManYeeBuilding
68DesVoeuxRoadCentral
HongKong
SecondaryAnalyst
MervynTang
Director
+85222639944
CommitteeChairperson
JanFriederich
SeniorDirector
+85222639910
MediaRelations:WaiLunWan,HongKong,Tel:+85222639935,Email:wailun.wan@fitchratings.com.
Additionalinformationisavailableonwww.fitchratings.com
ApplicableCriteria
CountryCeilings(pub.20Aug2015)(https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?
rpt_id=869287&cft=eyJ0eXAiOiJKV1QiLCJhbGciOiJIUzI1NiJ9.eyJleHAiOjE0NjAxMzEyMTIsInNlc3Npb25
LZXkiOiI0UFhKSFdTMlRYTVZLRVhXVlJERDVYUFgzUFBQR0lMUllRVUxBWTdCIn0.HoJyxETouN0bN
Ca0JOiCmRPJng89RSarSusFgbpRQ)
SovereignRatingCriteria(pub.12Aug2014)
https://www.fitchratings.com/site/fitchhome/pressrelease?id=1002193 2/3
4/8/2016 PressRelease
SovereignRatingCriteria(pub.12Aug2014)
(https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?
rpt_id=754428&cft=eyJ0eXAiOiJKV1QiLCJhbGciOiJIUzI1NiJ9.eyJleHAiOjE0NjAxMzEyMTIsInNlc3Npb25
LZXkiOiI0UFhKSFdTMlRYTVZLRVhXVlJERDVYUFgzUFBQR0lMUllRVUxBWTdCIn0.HoJyxETouN0bN
Ca0JOiCmRPJng89RSarSusFgbpRQ)
AdditionalDisclosures
DoddFrankRatingInformationDisclosureForm
(https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?
pr_id=1002193&cft=eyJ0eXAiOiJKV1QiLCJhbGciOiJIUzI1NiJ9.eyJleHAiOjE0NjAxMzEyMTIsInNlc3Npb25
LZXkiOiI0UFhKSFdTMlRYTVZLRVhXVlJERDVYUFgzUFBQR0lMUllRVUxBWTdCIn0.HoJyxETouN0bN
Ca0JOiCmRPJng89RSarSusFgbpRQ)
SolicitationStatus(https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002193)
EndorsementPolicy(https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?
context=2&detail=31)
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