Fitch commends improvement in PH finances

Posted at 01/22/2013 12:01 PM | Updated as of 01/22/2013 6:26 PM

MANILA, Philippines - Debt watcher Fitch Ratings has praised the Philippines' improved public finances as the country aims to get its first investment-grade rating.

"Sustained efforts under the Aquino and Arroyo administrations to improve fiscal management have brought many key fiscal metrics in line with or stronger than 'BB' and 'BBB' range peer medians," Fitch said.

The country is currently graded a notch below investment grade by Fitch, which in June last year affirmed the Philippines' BB+ rating with a stable outlook.

But the debt watcher stressed the country's fiscal revenue base remains to be its weakness.

"[It] potentially constrains fiscal resources for public investment in the infrastructure, health and education sectors of the economy," Fitch said.

"The implementation of revenue-enhancing measures, such as the recently passed sin tax bill, is potentially credit-positive, though execution risks remain high," the credit rater added.

Fitch meanwhile noted efforts of the Philippine government with regard to ramping up public spending.

"The Aquino administration's efforts to improve the quality and effectiveness of public expenditures are seen as supportive," Fitch said.

"While implementation of these efforts created an initial drag on GDP growth, improved fiscal transparency and reduced corruption leakages could help deliver longer-term benefits to the economy and address weaknesses elsewhere in the sovereign credit profile," it continued.