MANILA, Dec. 11 (Xinhua) -- International debt watcher Fitch Rating upgraded on Monday the Philippines' long-term credit rating from "BBB-" to "BBB" with a stable outlook on the back of sound macroeconomic fundamentals, prudent economic policies, and sustained economic growth.
In its report released late Sunday night, Fitch cited the Duterte administration's bold infrastructure development agenda and its comprehensive tax reform program, both of which are expected to bring material benefits to the Philippine economy in the years ahead.
"Strong and consistent macroeconomic performance has continued, underpinned by sound policies that are supporting high and sustainable growth rates," Fitch said.
It predicted the Philippines to remain among the fastest growing economies in the Asia Pacific region, with gross domestic product (GDP) growth likely to hit 6.8 percent next year and in 2019.
Credit ratings assess the default risk of a prospective debtor, providing guidance to investors, corporations, and governments worldwide. The improved credit rating of the Philippines will therefore enhance the government's access to financing and potentially present more favorable terms and conditions for future loans.
Among the key ratings drivers cited by Fitch include the Philippine economy's consistent growth performance evidenced by strong domestic demand and inflows of foreign direct investment, as well as the country's robust fiscal position.
The ratings agency lauded the fiscal policies of the government that are geared to boost infrastructure spending and liability management.
The government's tax reform initiative, in particular, will generate revenues for the government to finance its expenditure priorities while also supporting the projected decline of the government debt-to-GDP ratio to around 34 percent, below the "BBB" median of 41 percent of GDP.
On the monetary front, Fitch also mentioned that it expects inflation to remain within the 2 percent - 4 percent target band of the Central Bank of the Philippines.
Fitch also said that the current account deficit is also expected to be manageable, driven by imports of capital goods, and being offset by remittance inflows and business process outsourcing (BPO) receipts.
Furthermore, the credit agency said that foreign exchange reserve levels remain to be adequate, covering close to eight months of current external payments.
"We are pleased that Fitch is finally convinced that the Philippine economy now is much stronger and more resilient than in 2013, when they granted the Philippines its first investment grade credit rating of BBB-," Finance Secretary Carlos Dominguez said.
Under the Duterte administration's infrastructure development agenda, dubbed "Build Build Build," the government programs to spend between 160 billion U.S. dollars and 170 billion U.S. dollars on infrastructure projects all over the country until 2022.
The first package of the Comprehensive Tax Reform Program (CTRP), which is undergoing deliberations at the bicameral conference committee of Congress, seeks to cut personal income tax rates, thereby increasing take-home pay of Filipino workers.
The CTRP also seeks to lift certain value-added tax exemptions, impose higher excise tax on oil and automobile, and slap a tax on sugar-sweetened beverages.