Philippine credit quality to lag behind peers, says S&P

THE RECOVERY in the Philippine banking system’s credit quality is lagging the Asia-Pacific region due to renewed quarantines following its inability to control the coronavirus outbreak, according to S&P Global Ratings.

S&P Global said the other laggards are Indonesia and Malaysia, noting that the credit quality of other economies in the region is improving.

“Lackluster domestic demand could delay the resumption of revenues and income, slowing the unwind of debt built-up from the COVID-19 pandemic,” S&P said in a note Tuesday.

S&P identified China, New Zealand, Taiwan, and Vietnam as the recovery leaders in the region after they successfully contained their outbreaks and have started reaping the benefits in the form of strong export demand.

It said the Philippines, India, Indonesia, and Malaysia are still facing hurdles in containing their outbreaks, leading to a delay in resuming economic activity.

“Unexpected policy changes may threaten the trajectory of economic recovery,” it added.

Metro Manila and the surrounding provinces of Cavite, Laguna, Rizal, and Bulacan were returned to the strictest lockdown settings between March 29 and April 4 to allow healthcare facilities room to recover from the spike in cases. Other provinces have likewise seen their quarantine settings become more restrictive.

S&P Global also warned about the risk from US-China confrontation, slow vaccine rollouts, new waves of infection and policy uncertainty, any of which could hinder the recovery in credit quality.

Last week, S&P downgraded its growth forecast for the Philippines to 7.9% from 9.6% previously. The economic growth outlook for next year was likewise trimmed to 7.2% from an earlier forecast of 7.6%.

S&P Global last affirmed the Philippines’ “BBB+” long-term credit rating in May with a stable outlook, signifying that the rating may be maintained over the next 18 to 24 months. — Luz Wendy T. Noble