Credit rating agency Fitch Ratings has recognized sound monetary policy in the country that has helped inflation to slow down, according to the Bangko Sentral ng Pilipinas (BSP).
Fitch cited the progress in bringing down inflation, which averaged at 3.2 percent in the first 11 months of 2024 compared with the average of 6.0 percent last year. Fitch said this in a credit update report, which is separate from a rating action press release where it announces a credit rating action.
To help bring inflation back to within the target range of 2.0-4.0 percent, the Bangko Sentral ng Pilipinas raised interest rates three times by a total of 100 basis points last year. The last rate hike was in October 2023, when the BSP did an off-cycle increase of 25 basis points.
Since then, inflation has slowed down, settling at 2.5 percent in November this year. Amid a more favorable inflation environment, the BSP cut interest rates in August and October this year, each by 25 basis points, thereby providing support to economic growth.
Fitch expects the Philippine economic growth to accelerate to 5.7 percent this year, and to accelerate further to 5.9 percent next year and 6.2 percent in 2026.
Meantime, the BSP is enhancing the transmission of monetary policy in part by promoting capital market development. The BSP has collaborated with the banking industry to launch the Peso Interest Rate Swaps (Peso IRS). These and other initiatives of the BSP, the government, and the banking industry aim to boost trading and liquidity of local bonds and other instruments and make them more accessible not just to local but overseas investors as well.
Fitch’s report follows S&P’s revision of its outlook on the Philippines BBB+ rating to positive last November and R&I upgrade of the country’s rating to A- last August.
