Fitch rates Philippines bonds BB

Fitch Ratings said it assigned the Republic of the Philippines' upcoming $1.5 billion 25-year global bond an expected BB rating.

Fitch assigned the BB foreign and BB+ local currency issuer default ratings of the Philippines a negative outlook in July 2005 following the issuance of a temporary restraining order by the Supreme Court on the expanded value-added tax. The court decided in October that the tax was constitutional, allowing the government to implement the planned broadening of the tax base and increase in the tax rate.

Fitch said preliminary 2005 fiscal data indicate that, even with the delayed implementation of the expanded value-added tax, there was a marked reduction in the consolidated national government deficit to an estimated 2.5% of GDP in 2005 from 3.9% of GDP in 2004.

Notwithstanding this positive fiscal performance, Fitch said it remains concerned about the structure of public finances and the heavy sovereign debt burden when measured relative to government revenue. Estimated at 470% at the end of 2005, the Philippines' government debt/revenue ratio is more than double the median for the BB peer group. Moreover, revenue collection is still among the lowest of all rated sovereigns.

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