S&P Global Ratings has tempered its gross domestic product (GDP) growth outlook for the Philippines this year, according to a new report published yesterday, even as it continues to see a healthy external position and debt burden for the economy.

The international debt watcher now expects the Philippine economy to expand by 6.4%, slower than the 6.6% forecast given in March, according to its midyear Asia-Pacific Sovereign Rating Trends report.

At the same time, S&P retained its 6.4% growth forecast for the Philippines for 2018, to be followed by a pickup to 6.6% in 2019 and 6.7% in 2020, according to its latest estimates.

It did not give any explanation for the revision.

S&P maintained its “BBB” rating with a “stable” outlook on the Philippines in April, with the view that domestic conditions “remain conducive for sustained economic growth.”

A stable outlook means that the country’s ratings are unlikely to change over the next year or so.

The credit rater likewise expects price increases to remain manageable over the next four years, with estimates for annual inflation forecast falling within the central bank’s 2-4% target band. For 2017, S&P expects inflation to average 3.4%, slightly higher than the BSP’s latest 3.1% forecast.

Prices of basic goods and services inched up by 3.1% from a year ago in the first semester, according to latest data from the Philippine Statistics Authority.

In its latest assessment for the country’s credit rating, S&P counted the Philippines’ external position and fiscal and debt burden as “strengths,” largely due to the hefty dollar reserves held by the central bank and the declining share of debt to gross domestic product (GDP).

Gross international reserves totalled $81.413 billion as of end-June, enough to settle 8.7 months’ worth of import payments and is well above the three-month international standard.

The country’s debt-to-GDP ratio also slid to 41.87% in the first quarter from 43.56% the previous year, according to the Finance department.

The debt watcher stood “neutral” on its institutional and monetary assessments, as well as on budget performance.

It is now watching if the government can stay the reform course.

“We may raise the ratings if the newly calibrated fiscal program under this administration significantly boosts investment and economic growth prospects, or if improvements in the policy environment lead us to a better assessment of institutional and governance effectiveness,” S&P’s mid-year report read.

The country’s “stable” outlook means ratings will likely steady over the next 12-18 months.

“We may lower the ratings if the reform agenda stalls or if the recalibrated fiscal program leads to higher-than-expected deficits sufficient to reverse the progress made under the previous administration.”

The Finance department hopes to implement its first of up to five tax reform proposals by January 2018. The first package now awaits Senate approval after the House of Representatives passed it on May 31. The additional revenues are expected to help fund the Duterte government’s P8.4-trillion infrastructure spending plan over the next six years. — Melissa Luz T. Lopez

RELATED ARTICLESMORE FROM AUTHOR