The Philippines on Monday was handed a credit rating upgrade from international agency Fitch which raised the nation's sovereign rating by one level, citing continued investor confidence despite a deadly drug war.
President Rodrigo Duterte has launched an unprecedented crackdown on drugs that has killed thousands and sparked widespread condemnation of alleged extrajudicial killings from rights groups and Western powers. The bloody campaign has also risked detering investors from one of Asia's fastest growing economies. However, Fitch raised the rating on the Philippines' long-term foreign currency denominated debt from BBB- to BBB with a stable outlook, saying the nation's strong macroeconomic performance had continued. "There is no evidence so far that incidents of violence associated with the administration's campaign against the illegal drug trade have undermined investor confidence," Fitch said in a statement. The upgrade puts the Philippines on par with Italy and ahead of Indonesia, according to Bloomberg. The Philippines enjoyed strong economic growth during the previous administration of Benigno Aquino. Fitch, as well as competitors Standard and Poor's and Moody's rating agencies, in 2013 raised the Philippines to investment grade level for the first time, indicating a lower risk to investors.
Following Duterte's election 17 months ago, S&P warned his war on crime was threatening the Philippines' economy and endangering its democratic institutions. In September this year, Moody's also said the drug war and conflict with Islamist militants in the south posed a "rising" risk to the economy. However Fitch on Monday said economic performance had remained strong, owing to "sound policies that are supporting high and sustainable growth rates". "Investor sentiment has also remained strong, which is evident from solid domestic demand and inflows of foreign direct investment," it added. The Philippine economy grew 6.9 percent in the third quarter of 2017, remaining one of the best performing economies in Asia. Fitch said the Duterte administration's tax reform bill would boost revenue.
The measure, which includes lowering income taxes and raising levies on fuel, sugar and car purchases, is expected to be passed this month. Fitch added the government's plans to boost infrastructure spending would support robust growth. "That's good news and (a) reaffirmation of the Philippines' progress under Duterte," presidential spokesman Harry Roque said of the upgrade.