SINGAPORE — Standard & Poor’s Ratings Services on Friday affirmed its BB-/B foreign currency and BB+/B local currency sovereign credit ratings on the Philippines with a stable outlook.

The ratings reflect the sharply improved external liquidity position, which, combined with fiscal consolidation efforts and attendant decrease in external borrowing, is yielding a substantially lower net external debt position. This is ameliorating one of the key vulnerabilities of the sovereign, given that over 40 percent of its debt is denominated in foreign currency. The ratings also take into account continued efforts to increase tax revenues from a low 14 percent of GDP and the country’s track record of steady economic growth.

"Despite these advances, a number of key debt ratios reveal a still-high level of vulnerability to economic shocks or adverse policy shifts than what is generally associated with this rating category," said Standard & Poor’s credit analyst Agost Benard.

Total public sector debt at 64.3 percent of 2007 GDP, is well above the BB median 38.5 percent while debt-to revenue ratio of 345 percent, against the BB median 146 percent points to much weaker debt service capacity.

In addition to the high public leverage, the low revenue base is also a key reason behind an extended period of meager public investment.

"This left the Philippine economy with inadequate infrastructure, unable to fully exploit growth opportunities," Benard said.

The stable outlook on the rating balances increasingly robust external liquidity and significant improvements in general government and public sector financial performance, against continued risks to revenue and deficit targets in light of weak collection efficiency.