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4/8/2016 PressRelease

FitchAffirmsthePhilippinesat'BBB'OutlookPositive
FitchRatingsHongKong08April2016:FitchRatingshasaffirmedthePhilippines'LongTermForeign
andLocalCurrencyIssuerDefaultRatings(IDRs)at'BBB'and'BBB'respectively,andtheOutlook
remainsPositive.TheissueratingsonthePhilippines'sseniorunsecuredforeignandlocalcurrency
bondsarealsoaffirmedat'BBB'and'BBB'respectively.TheCountryCeilingisaffirmedat'BBB'andthe
ShortTermForeignCurrencyIDRat'F3'.

KEYRATINGDRIVERS
TheaffirmationofPhilippines'sovereignratingsreflectsthefollowingfactors:

Externalfinancesarearatingstrength.ThePhilippineshasbeenrunningcurrentaccountsurpluses
since2003,withanaverageofaround3%ofGDPfortheperiod20112015.Thishasbeenhelpedby
thesteadyremittanceinflowandhasledtoabuildupinforeignexchangereserves.Thecountry'snet
externalcreditorpositionatnearly14%ofGDPcomparestothemediannetdebtorpositionof4.6%of
GDPamongpeersinthe'BBB'ratingcategory.

Governmentdebtanddeficitlevelshavebeendecliningandbytheendof2015,generalgovernment
debttoGDPisestimatedatabout36%ofGDPcomparedwith43%ofGDPattheendof2010.Fiscal
deficitshavenarrowedtojust0.9%ofGDPin2015from3.5%ofGDPin2010.Fitchestimatesthatthe
fiscaldeficitwouldremainunder2%ofGDPover20162017.However,theagencycontinuestoviewlow
governmentrevenues,whichreducesthesovereign'sabilitytocontainfiscalbalancesintheeventofa
shock,asaweaknessinthePhilippines'fiscalprofile.Fitchestimatesgeneralgovernmentrevenuewas
closeto20%ofGDPin2015,whichislowerthanthe'BBB'median's28.6%and'A'median's34.7%.

ThePhilippines'lowaverageincomeandlevelofdevelopmentisacreditweakness.ThePhilippines'
GDPpercapitain2015wasUSD2,860,whichislowerthanthe'BBB'medianofUSD9,253.This
measurehoweverdoesnotcapturethesignificantsupporttolivingstandardsprovidedbyoverseas
Filipinoremittances.In2014,thecountryfellinthe37thpercentileonUN'sHumanDevelopmentIndex,
comparedwiththe63rdpercentileforthe'BBB'median.

Governancestandardshavecontinuedtostrengthensince2010underthecurrentadministrationof
PresidentBenignoAquinoIII,especiallygovernmenteffectivenessandpoliticalstabilityasmeasuredby
WorldBank'sgovernancemetrics.Presidentialelectionson9May2016willseeachangeof
administrationasMr.Aquinoisconstitutionallybarredfromseekingreelection.Itremainstobeseen
whetherthenextadministrationwillpreserveorextendtheimprovementsinthisareaseenunderMr.
Aquino'sstewardship.

Macroeconomicgrowthperformanceremainsfavourable.AveragerealGDPgrowthin20112015was
5.9%,whichisfarabovethe'BBB'medianof3.3%andthe'A'medianof3.2%.Fitchexpectsthe
Philippines'growthmomentumtocontinueandexpectsrealGDPgrowthtoaveragearound6%over
201617.

LiquiditylevelsinthePhilippines'bankingsectorareample,capitalisationisstrongandloanloss
reserveshaverisen.ThebankingsectorhasalreadyimplementedBaselIIIminimumcapitalstandardsin
fullatthebeginningof2014.Loangrowthslowedtonearly14%in2015fromcloseto19%in2014.
Activesupervisionandregulationbyariskawarecentralbank,whichhasprogressivelystrengthened
riskmanagementrequirementsforthebanksovertheyears,havehelpedtotempertherisksfromhigh
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4/8/2016 PressRelease

creditgrowth.

RATINGSENSITIVITIES
Themainfactorsthatindividuallyorcollectivelymightleadtopositiveratingactionare:

Furtherevidencethatimprovementingovernancestandardscanbesustainedfollowingachangein
governmentafterelections.
Furtherbroadeningofthegovernment'srevenuebasethatlendsgreaterstabilitytogovernment
finances.
Continuedstronggrowthwithouttheemergenceofimbalances.

TheratingOutlooksarePositive.HenceFitchdoesnotanticipateamaterialprobabilityofnegativeaction
overtheforecastperiod.However,themainfactorsthatcouldseetheratingsreverttoStableOutlook
are:

Deteriorationingovernancestandardsand/orreversalinreformsimplementedundertheAquino
administrationcouldbecreditnegative.
Instabilityinthefinancialsystem,possiblytriggeredbyasustainedperiodofexcessivecreditgrowth
couldbecreditnegative

KEYASSUMPTIONS
GlobaleconomicconditionsdevelopinlinewithFitch'slatestGlobalEconomicOutlook.

Contact:

PrimaryAnalyst
SagarikaChandra
AssociateDirector
+85222639921
Fitch(HongKong)Limited
19/FManYeeBuilding
68DesVoeuxRoadCentral
HongKong

SecondaryAnalyst
MervynTang
Director
+85222639944

CommitteeChairperson
JanFriederich
SeniorDirector
+85222639910

MediaRelations:WaiLunWan,HongKong,Tel:+85222639935,Email:wailun.wan@fitchratings.com.

Additionalinformationisavailableonwww.fitchratings.com

ApplicableCriteria
CountryCeilings(pub.20Aug2015)(https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?
rpt_id=869287&cft=eyJ0eXAiOiJKV1QiLCJhbGciOiJIUzI1NiJ9.eyJleHAiOjE0NjAxMzEyMTIsInNlc3Npb25
LZXkiOiI0UFhKSFdTMlRYTVZLRVhXVlJERDVYUFgzUFBQR0lMUllRVUxBWTdCIn0.HoJyxETouN0bN
Ca0JOiCmRPJng89RSarSusFgbpRQ)

SovereignRatingCriteria(pub.12Aug2014)
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4/8/2016 PressRelease

SovereignRatingCriteria(pub.12Aug2014)
(https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?
rpt_id=754428&cft=eyJ0eXAiOiJKV1QiLCJhbGciOiJIUzI1NiJ9.eyJleHAiOjE0NjAxMzEyMTIsInNlc3Npb25
LZXkiOiI0UFhKSFdTMlRYTVZLRVhXVlJERDVYUFgzUFBQR0lMUllRVUxBWTdCIn0.HoJyxETouN0bN
Ca0JOiCmRPJng89RSarSusFgbpRQ)

AdditionalDisclosures
DoddFrankRatingInformationDisclosureForm
(https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?
pr_id=1002193&cft=eyJ0eXAiOiJKV1QiLCJhbGciOiJIUzI1NiJ9.eyJleHAiOjE0NjAxMzEyMTIsInNlc3Npb25
LZXkiOiI0UFhKSFdTMlRYTVZLRVhXVlJERDVYUFgzUFBQR0lMUllRVUxBWTdCIn0.HoJyxETouN0bN
Ca0JOiCmRPJng89RSarSusFgbpRQ)
SolicitationStatus(https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002193)
EndorsementPolicy(https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?
context=2&detail=31)

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