MANILA - Debt watcher Fitch Ratings on Thursday said it has affirmed the Philippines’ investment-grade BBB rating with a negative outlook.

Fitch said the 'BBB' rating balances strong growth, external finances and a credible economic policy framework against lagging structural indicators, including per capita income and governance, relative to peers.

It also said that while the Philippines is forecast to post strong growth this year, its prospects in the succeeding years are clouded by several risks.

The credit watcher said “the negative outlook reflects risks to the country’s medium-term growth prospects, fiscal adjustment path and external buffers in an environment of higher interest rates, weaker external demand and higher commodity prices.”

GDP is forecast to grow 6.8 percent this year on strong domestic demand as the pandemic recedes. But after posting an average growth rate of 7.8 percent in the first half, Fitch said there would be a slowdown in the second half amid rising inflation and interest rates, as well as weaker global demand.

Fitch said growth is likely to slow to 5.5 percent in 2023 before recovering to 6.2 percent in 2024.

“Downside risks include global growth falling below Fitch's forecasts of 1.7 percent in 2023 and 2.8 percent in 2024, or the Philippine central bank raising policy rates beyond our assumption of 5.25 percent,” Fitch said.

The Bangko Sentral ng Pilipinas raised its benchmark rate to 4.25 percent in its last policy meeting.

But analysts are expecting the BSP to implement another rate hike after the US Federal Reserve hinted it would aggressively raise rates again.

• BSP hikes benchmark rate to 4.25 percent following Fed adjustment

Last month, Moody’s Investor Service also affirmed its Baa2 rating on the Philippines but unlike Fitch, with a stable outlook.

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• Moody's affirms Philippines Baa2 ratings with 'stable' outlook