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Fitch frets over Duterte’s COVID response: Downside risks materializing, buffers eroding

International credit rating agency Fitch is getting jittery over the Duterte administration’s efforts to contain the pandemic following the recent spurt in COVID cases which has put the Philippines as the new virus hot spot in the region.

“Given the Philippines’ difficulty in containing the virus, these downside risks are materializing and our current growth forecast of -4 percent for 2020 now seems optimistic and is likely to be revised down, “ said Fitch Associate Director Sagarika Chandra in the credit watcher’s latest report on the economy.

Chandra was reacting to the 16.5 percent plunge in the second quarter this year (worst in four decades) where the government placed Metro Manila and the other growth centers in Luzon under a lockdown for the entire period.

“We anticipated some deterioration in the Philippines’ credit metrics as a result of the pandemic in our last rating review, when we revised the Outlook from to Stable from Positive and affirmed the rating at ‘BBB’. We noted at that time that the economic projections were uncertain and subject to considerable downside risks,” said Chandra.

Amid the Philippines’ deteriorating growth outlook, Chandra said Fitch would reassess if the Philippines could still keep Finance Secretary Sonny Dominguez’s fiscal deficit and public debt targets in the medium-term which has served as basis for the country’s favorable rating at present.

Chandra said the Philippines debt ratio could plummet from 34.1 percent of GDP in 2019 to 48 percent of GDP in 2020. “These buffers are being eroded given the impact of the pandemic, but there is still some room at the Philippines’ rating level to accommodate some deterioration in the fiscal outlook,” Chandra said.

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