Global credit watchdog Fitch Ratings said Tuesday it affirmed the long-term issuer default ratings on five privately owned banks in the Philippines, driven by expectations of extraordinary support from the sovereign amid the economic slowdown.
Fitch said in a statement it also retained the stable outlook on four banks to mirror that on the Philippines, which is rated investment grade or “BBB”, also with a stable outlook.
Fitch said the Philippines’ economy was taking a severe blow from the coronavirus pandemic, with GDP contracting by 9 percent in the first half of 2020—the worst in Southeast Asia.
“We expect it to shrink 8 percent for the full year. We forecast economic growth to rebound to 9 percent in 2021, but this in part reflects a low base effect,” it said.
Fitch said weak domestic consumption and accelerating credit impairment were turning banks’ operating environment more challenging.