Philippines gets 1st-ever investment grade

[March 27, 2013]  MANILA, Philippines (AP) -- The agency said it has upgraded the Philippines' long-term, foreign currency-denominated debt to BBB minus from BB plus and long-term local currency-denominated debt to BBB from BBB minus. The outlooks on both ratings are stable.

Fitch cited the Philippines' strong sovereign external balance and persistent current account surplus. The economy has expanded 6.6 percent in 2012 and Fitch expects 5.5 percent growth this year.

President Benigno Aquino III said that the upgrade would lower interest on debts and increase investments. He said it was an affirmation of his good governance agenda and economic reform.

"More companies in the real economy can now consider us an investment destination," Aquino said, adding that an investment grade for sovereign debt should lead to lower borrowing costs for Philippine companies in the international markets.

Finance Secretary Cesar Purisima said that the Aquino administration remains committed to eliminating corruption, spending on infrastructure and improving the overall business climate.

Fitch credited the Aquino administration's centerpiece reforms, including fiscal management and the recent introduction of higher taxes on alcohol and tobacco to boost revenues.

The Philippines still lags behind Southeast Asian neighbors in foreign direct investments, and foreign chambers of commerce have cited restrictions such as a constitutional ban on foreigners owning more than 40 percent of key industries. Aquino has resisted attempts to amend those provisions.

The Philippines relies heavily on remittances sent by about 10 million overseas workers. The money makes up 10 percent of the total economic output and fuels domestic spending but does little to alleviate unemployment at home. About a third of the population of 94 million live below the poverty line.

[Associated Press; By TERESA CEROJANO]

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