Fitch ups Philippines' outlook to stable

Fitch Ratings said it revised the outlook on the foreign currency and local currency issuer default ratings of the Republic of the Philippines to stable from negative, while affirming the ratings at BB and BB+, respectively. The agency also affirmed the Philippines' B short-term issuer default rating and the BB country ceiling.

The good 2005 fiscal performance and 2006 fiscal outlook, together with a more settled political environment, warrant the change in outlook, the agency said. With changes to the value-added tax now fully implemented, Fitch said it expects that the national government deficit will fall to 2.1% of GDP this year and the primary surplus to reach 3.4% of GDP.

Fitch noted, however, that while short-term fiscal prospects have improved, medium-term challenges remain and public finances are still a rating weakness: government revenue relative to GDP is still the second-lowest of all rated sovereigns and political developments could still affect creditworthiness, as furtive negotiations on constitutional reform displace other legislative initiatives and political maneuvering continues in a struggle for power.

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