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Felipe Medalla, governor of Bangko Sentral ng Pilipinas (BSP), reaffirmed the central bank’s readiness to use its toolset to handle problems that will affect the domestic financial sector.

The central bank’s unusual and timely efforts, such as forceful monetary tightening and prior temporary financing to the government during the pandemic, he claimed in a statement released Monday night, “have not resulted in adverse side effects on the stability of the financial system.”

The central bank “stands ready to use all the tools at its disposal to preserve price stability” because the Philippine banking system is “liquid and well-capitalized,” he said.

The declaration was made after Fitch Ratings on Monday changed the outlook of its ‘BBB’ rating on the Philippines from negative to stable after noting the strong post-pandemic recovery of the economy, the government’s sound economic policy framework, and the country’s favorable external payments position.

The debt rating agency also confirmed its ‘BBB’ rating for the nation, which is one notch above the required investment grade.

The most recent rating action by Fitch Ratings, according to a commentary, “reflects Fitch’s improved confidence that the Philippines is returning to strong medium-term growth after the Covid-19 pandemic, supporting sustained reductions in government debt/GDP (gross domestic product), after substantial increases in recent years.”

GDP growth for the domestic economy was 6.4 percent in the first quarter of 2023, which was in line with its medium-term growth potential but the slowest rate of growth since domestic output increased to 12 percent after falling as low as -16.9 percent in the second quarter of 2022 due to the pandemic.

According to Fitch, the domestic output will increase by more than 6 percent over the medium term, which is “considerably stronger than the ‘BBB’ median of 3 percent.”

Although it was highlighted that “ongoing reforms to the business environment and investment regulations create upside growth potential,” it was stated that growth has moderated “with the post-pandemic recovery boost fading.”

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