MUMBAI -- Standard & Poor's Ratings Services affirmed its sovereign credit ratings on the Republic of Philippines with a stable outlook, but said the country is still relatively highly vulnerable to economic and policy shocks.
The agency has 'BB-/B' foreign currency and 'BB+/B' local currency ratings on the Philippines.
It said 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," it added.
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 S&P'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, the agency added.
"This left the Philippine economy with inadequate infrastructure, unable to fully exploit growth opportunities," Benard said.