Standard & Poor's Ratings Services has raised the credit rating of the Philippines, citing that the country's fiscal flexibility is gradually increasing and the debt profile is improving.

S&P Wednesday upgraded the long-term foreign currency sovereign credit rating of the Philippines to 'BB+' from 'BB'. S&P noted that a factor supporting the ratings on the Philippines was the growing strength of the country's external profile. It commented that a long record of current account and overall balance of payments surpluses had produced a substantial foreign exchange reserve buffer.

The foreign currency rating upgrade reflects our assessment of gradually easing fiscal vulnerability, as the government's fiscal consolidation improves its debt profile and lowers its interest burden, said S&P's credit analyst Agost Benard in a statement. The rating action also reflects the country's strengthening external position, with remittances and an expanding service export sector continuing to drive current account surpluses, he added.

It was reported in May that economic growth in the Philippines rebounded strongly in the first quarter ending March 31 due to continued strong private consumption, a pick-up in government spending and a recovery in exports. The economy expanded 6.4 percent in the first quarter compared to the same period a year ago.

The government spending rebounded strongly in the first quarter, following a stimulus package that was introduced towards the end of last year and also weak spending in the year-earlier period.

On the production side of the economy, the main driver was services, which has benefited from the continued strong growth of the business process outsourcing (BPO) sector of the economy. Manufacturing growth picked up slightly in line with the recovery in the export sector.

S&P noted that medium-term growth prospects would be more favorable if increased political stability stimulated private sector growth and the administration's fiscal consolidation program enabled higher levels of public investment.

We project ongoing current account surpluses of about 2% of GDP, based on remittance inflows from a large and well-diversified expatriate labor force, and a fast-expanding business process outsourcing industry, Benard added.