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MANILA, Philippines - London-based Fitch Ratings has retained its credit rating and outlook for the Philippines amid the country’s strong macroeconomic fundamentals, improving fiscal position, and stable financial system.

In a statement released yesterday, Fitch director for Asia Pacific Sovereign Ratings Group Philip McNicholas said they are keeping the country’s long-term foreign and local-currency issuer default ratings at “BB+” and “BBB” respectively.

Fitch, McNicholas said, has retained a stable outlook for both ratings.

“The ratings and outlook are supported by strong external finances, a track record of macroeconomic stability, favorable economic prospects, and falling public debt ratios,” McNicholas stressed.

The country’s gross domestic product (GDP) growth zoomed to 6.4 percent in the first quarter of the year from the revised four percent in the fourth quarter of last year.

This was the second fastest GDP growth in Asia next to China, and surpassed the government forecast of 5.2 percent.

As such, he explained that Fitch sees the country’s GDP growth accelerating to 5.5 percent this year after slackening to 3.9 percent last year from 7.6 percent in 2010 due to weak global trade and government underspending.

Likewise, the credit rating agency said 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.

The Bangko Sentral ng Pilipinas (BSP) has set an inflation target of between three percent and five percent this year.

On the other hand, the Department of Finance(DOF) hopes to contain the country’s budget deficit at 2.6 percent of GDP this year.

“Lower inflation and a moderate fiscal deficit suggest scope for policy flexibility to respond to adverse economic shocks, should they materialize. However, the country has some way to go to narrow the gap in credit and structural fundamentals with peers,” McNicholas said.

Fitch also cited the pick-up in investments to 21.7 percent of GDP, saying the improvement was encouraging and could support stronger growth if sustained.
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