Fitch Ratings affirmed Tuesday Philippines' long-term foreign and local currency Issuer Default Rating at 'BB' and 'BB+' respectively, with a stable outlook. The agency also affirmed the short-term IDR at 'B' and the country ceiling at 'BB+'.

While the Philippines has not been directly exposed to some of the most serious aspects of the international financial crisis, including, for example, severe stresses affecting the domestic banking system, it is not impervious to the deterioration in global economic growth prospects, James McCormack, Head of Asia Sovereigns at Fitch said.

Fitch forecasts the fiscal deficit to be PHP271 billion in 2009, equivalent to 3.5% of GDP, as the government increases spending to counter the effect of the global slowdown on the economy. The firm forecasts the increase in Philippines fiscal deficit in the current year to be in line with 'BB' rated peers. At the same time, the Fitch considers the country's lower government revenue base, the lowest among the peers, as a rating weakness. The debt to revenue ratio stood at 360% in 2008 versus 141% among the peers. Also, the debt to GDP ratio at 56.3% remained higher than the debt median of peers of 30.6%.

Meanwhile, the firm forecasts Philippines' growth to slow to 0.1% in 2009, reflecting a sharp reduction in exports offset by a slightly slower drop in imports. The firm also forecasts the country's remittances to fall, by 6.8% in the current year.

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