Fitch keeps PHL sovereign debt rating unchanged with stable outlook

Fitch Ratings on Tuesday said it kept the credit rating and outlook of the Philippines, citing the country’s strong macroeconomic fundamentals, improving fiscal position, and stable financial system.   Fitch director for Asia Pacific Sovereign Ratings Group Philip McNicholas affirmed the long-term foreign- and local-currency issuer default ratings at 'BB+' and 'BBB-' respectively, the credit rating agency said in a emailed statement.   The outlook for both ratings was also retained at stable, said McNicholas.   "The ratings and Outlook are supported by strong external finances, a track record of macroeconomic stability, favorable economic prospects, and falling public debt ratios," he stressed.   Philippine output as measured by gross domestic product (GDP) expanded by 6.4 percent in the first quarter of the year from the revised 4 percent in the fourth quarter of last year. It was the second fastest GDP growth in Asia next to China and surpassed the government forecast of 5.2 percent.   Fitch sees the Philippine output at a faster 5.5 percent this year from 3.9 percent last year and from 7.6 percent in 2010, said McNicholas.   Philippines monetary authorities would be able to contain inflation at 3.5 percent this year from 4.7 percent last year despite the faster economic growth, according to Fitch. Gap in credit, structural fundamentals   “Lower inflation and a moderate fiscal deficit suggest scope for policy flexibility to respond to adverse economic shocks, should they materialize,  McNicholas noted.   “However, the country has some way to go to narrow the gap in credit and structural fundamentals with peers,” he added.   Fitch cited the pick-up in investments to 21.7 percent of GDP, saying the improvement was encouraging and could support stronger growth if sustained.   Credit growth accelerated in 2011 and has remained strong so far in 2012 amid the robust domestic liquidity, it added.   "However, structural weaknesses including low average income, a weak business environment and a low fiscal revenue take weigh on the credit profile," said McNicholas.   According to Fitch estimates, government debt fell to 42 percent of GDP as of end-2011, with a word of caution that a low fiscal revenue base is a drag on the credit profile–the sovereign raised just 14 percent of GDP in revenue in 2011.   The Philippine debt-to-revenue ratio of 300 percent remains well above the 'BB' range median of 163 percent, it said.   Fitch rates the country's sovereign credit at one notch below investment grade with a stable outlook while Moody's Investors Service as well as Standard & Poor’s rate the country at two notches below investment grade on positive outlook. —VS, GMA News