MANILA, Philippines - Fitch Ratings affirmed yesterday the Philippines' investment grade rating, citing strong economic growth, steady inflow of remittances from overseas Filipinos, continued expansion of business process outsourcing (BPO) industry and low interest rates.

In a statement, the rating firm said it affirms the country's long-term foreign and local currency issuer default ratings at 'BBB-' and 'BBB,' respectively. The outlook on both ratings is stable, which means no change is expected in the next six months at the least.

Fitch expects the Philippine economy growing by an average of 6.5 percent this year until the next, slower than the 7.2- percent expansion in 2013.

"The Philippines' five-year average real GDP (gross domestic product) growth rate rose to 5.3 percent in 2013, well above the median of 3.2 percent for the 'BBB' peer rating group," Fitch said.

Despite the country's growth momentum, Fitch said the risk of an overheating economy remains limited. The credit rating firm pointed out inflation in 2013 and early this year remained well-within the central bank's three to five-percent target range.

"However, a sustained boom in Philippines' property market could potentially increase both economic and financial volatility in the event of a large-scale downturn in prices," Fitch said.

At the same time, Fitch said the fundamentals of the country's banking sector remain stable as capitalization is high and liquidity remains adequate.

"These strengths should help offset the risks of higher credit growth, particularly those related to the property market," the debt watcher noted.

"The Philippines' external finances remain a key rating strength as its net external creditor position reached seven percent of GDP in 2013 due to continued current account surpluses," it said.

The country's fiscal deficit went down to 1.4 percent of GDP last year from 2.3 percent in 2012. Fitch said it expects the fiscal deficit to further widen as the government undertakes rebuilding efforts following Super Typhoon Yolanda in November.

Fitch in March last year awarded the country its first investment grade rating on the back of the economy's faster-than-expected growth in 2012 at 6.8 percent and reforms put in place by the government that improved the business environment.

The firm said its outlook on the Philippine credit rating may be upgraded to positive if further improvements will be made to enhance business climate and accelerate domestic and foreign investments in the country.

By Kathleen A. Martin (The Philippine Star)

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